Telstra is set to oppose Prime Minister John Howard's plan to install former communications executive Geoff Cousins on the board of the telco.
The board's decision will further destabilise the government's looming selloff of $8 billion in Telstra stock.
The Australian Financial Review says the Telstra board, in an unprecedented public show of defiance, will say in a notice for its November 14 annual general meeting that it does not recommend the appointment of Mr Cousins.
The notice of meeting is to be released to the Australian Stock Exchange on Monday.
The newspaper says Telstra is opposing his election on the grounds that it has not had the opportunity to do due diligence on him and having regard to the independence requirement of the board's charter.
The government will use its 51.8 per cent shareholding to ensure Mr Cousins is elected to the board at the AGM, but the standoff will complicate the government's T3 share sale process and could further weigh down on the weak share price.
Mr Cousins told the newspaper he would act in the interests of all shareholders if he joined the board, and he need not give up any role before becoming a director to resolve any conflict of interest.