Opponents of privatisation say regional services are at risk

The Australian Senate has rejected a bill to privatise the country's national phone company, Telstra.

The Senate voted against the privatisation bill by a majority of 34 to 26 on Thursday.

Ministers have said the government plans to reintroduce the bill within three months but may call an early election if the Senate rejects it again.

The planned sale of the government's 50.1% stake in Telstra would have been Australia's biggest ever privatisation, expected to raise about A$35bn ($23bn; �14.5bn).

Rural anger

Opponents of the sale argue it could result in poorer services in rural and outback areas of Australia, where Telstra is often the only telephone operator.

Supporters say it would make the company more competitive, and remove the conflict between the government as regulator and owner.

Treasurer Peter Costello said the issues had been fully debated and that the government would resubmit the bill.

"The Australian government will be calling on the Senate, yes, to pass its legislation," said Mr Costello, who is the ruling Liberal Party's designated successor to Prime Minister John Howard.

Poll option

Finance Minister Nick Minchin said a second rejection could spark an election as it would be "a double dissolution trigger".

Australia's constitution gives the government the option of calling an early election if the Senate rejects a bill twice.

It it won, it would then be permitted to hold a joint sitting of both houses of parliament to push through the disputed legislation.

The Telstra privatisation bill has already passed the lower house, where the government has a majority.

Four independent senators voted against it.