One.Tel, which placed $523 million on the spectrum bidding table this week, was unofficially cautioned by the Australian Stock Exchange (ASX) after asking its major shareholders, News and PBL, to exercise their options early in order to raise equity for the spectrum bid.
The telco offered News and PBL $20 million each in exchange for exercising options worth $140 million, which the ASX said would "retrospectively" alter the option price.
The ASX claimed the tactic would contradict exchange listing regulation 6.23, which "prohibits changes to the terms of options to, among other things, reduce the exercise price", unless shareholders voted in favour of it.
Since only 30 per cent of One.Tel is owned by shareholders apart from PBL, News, or other affiliate companies, shareholder approval was virtually guaranteed, even if all of the independent shareholders objected to the tactic.
ACA spokesman Ian Hayne said the government regulatory body, which hosted the auction, had no concerns about the methods bidders used to raise equity to finance their bid. "What's it got to do with their ability to run a mobile phone network?" he asked. "If they come up with the money, we're happy."
In a statement made when the auction was announced last year by the Minister for Communications, IT and the Arts, Senator Alston, the Government expected the auction of the air space would "boost competition in the telecommunications market".
Following the announcement of the auction results, a spokesman for Senator Alston opted to leave the matter within the boundaries of the ASX. He said any "outstanding matters" would be dealt with by the ASX. "It's not a matter for us to deal with."
The only bid higher than One.Tel's was from Hutchison Telecommunications. Hutchison offered $671 million for the spectrum -- exactly the value promised by the Federal Government for Telstra's infrastructure overhaul, and paid for by its initial, partial privatisation.