PBL and News Ltd offshoot One.Tel has been unofficially cautioned by the Australian Stock Exchange for attempting an equity-raising tactic which favours its major shareholders over smaller shareholders.
The ASX rebuke arose when the telco asked shareholders PBL and News Ltd to exercise their options, worth $140 million each, early to raise equity to bid for spectrum.
According to One.Tel, the options were originally issued on the condition that $80 million worth could be exercised in April "this year or next year" with the remaining $60 million only to be exercised the following year.
The ASX's media relations manager, Gervase Greene, said One.Tel had offered $20 million each to News and PBL as "compensation" for the possibility that shareholders might not approve of the tactic. "What that's doing is retrospectively altering exercise price for the options. In other words, what they're getting them to do is pay $120 million for $140 million worth of options," he said.
Greene said this capital-raising tactic did not comply with ASX listing 6.23, which "prohibits changes to the terms of options to, among other things, reduce the exercise price". He said One.Tel will contradict this law by exercising options early and therefore effectively altering the option price.
One.Tel maintains that if One.Tel shareholders agree to the ploy the tactic is legal. But since only 30 per cent of One.Tel is owned by shareholders apart from PBL, News or other affiliated companies, shareholder approval is virtually guaranteed, even if all independent shareholders object to the tactic.
Sandy Slessar, a spokeswoman for One.Tel, said the $20 million "compensation" offered to News and PBL was to show One.Tel's "gratitude" toward its supporting companies.
Meanwhile, following a 52-day long bidding war, One.Tel yesterday emerged successful in the 1.8 Ghz spectrum auction, acquiring lots in each of the five major capital cities.
Contributing more than $500 million, the company came a close second to Hutchison Telecommunications, which spent $671 million aquiring spectrum.
Total funds raised through the auction amounted to $1.32 billion.