Telstra buy-back favours low tax payers

Details of Telstra's share buyback were unveiled on October 3, with shareholders to be offered the opportunity to tender their shares. There will be seven prices between $4.20 and $5.40, but whichever Telstra decides on, shareholders will be paid a fixed $1.50 cash with the rest paid as a fully franked dividend.

To be beneficial to retail shareholders, each will have to look at factors such as income and capital gains tax but analysts believe that investors on low marginal income tax rates will gain the most. Macquarie Equities said the franked dividend component is likely to attract many shareholders. CommSec said that superannuation funds should also find the buyback attractive. Of Telstra's 1.8 million shareholders, 25 per cent are retail investors.