TLS - Telstra Corporation

[Julia]

I guess i mean TLS is worth far more than where it is at the moment, its all this government uncertainty.

Why is the currently depressed SP just due to the political uncertainty?
If that were the case, the downturn would not have been strongly under way since long before the election.

I suppose the punters see a company with $6b of free cash flow as not bad. You would say the banks earn that, but if the Government suggested a super profit tax on them they would crash.

I'd bet my last dollar on a super profit tax never, ever applying to the banks.
Even if it did, it would only be passed on to customers, and governments know this. Completely counterproductive imo.

So therefore it boils back to peoples perceptions of value.

And here you have the essence of this whole discussion.
We all know the SP is a consequence of market sentiment. Nothing more complicated than that. And it's a self-perpetuating concept.
So you can have the best managed company ever, with apparently solid fundamentals, but if the market doesn't believe in it, you will simply not see the SP rise.

 

[sptrawler]

touche I agree the Banks are are really above Government interferance, as was proven in the G.F.C .
However the fact remains that the Telstra network is critical infrastucture (until new technology takes over) and the Government can't keep applying restrictive legislation to Telstra to allow competitors to free load. Well i suppose actually they can but as i said it is becoming more and more politically charged due to the fact Telstra is loosing market share. Therefore they put less money into upgrading the critical infrastructure, which in turn results in a poorer service. This then comes back on the Government because the service is declining due to lack of spending which is due to ACCC reducing the return on investment by Telstra.
That is why the Government has to replicate the system or compensate Telstra to improve it

 

[boofhead]

Why do people say the competition freeloads off Telstra? Surely wholesaling at higher prices than what it retails suggests competition is paying more than the consumer.

 

[sptrawler]

Actually boofhead, when Telstra was floated they had a monopoly, legislation was passed to stop Telstra offering deals as cheap as any entrant to the market. This was done to encourage entrants to the market and that is understandable. However it is now getting to a point where the legislation needs to be relaxed, as Telstra has lost over 50% of it's market share yet is the company that is expected to upgrade the system for the other multinational carriers. They pay a pittance to compensate Telstra for providing Australia wide communication infrastructure

 

[sptrawler]

Why is the currently depressed SP just due to the political uncertainty?
If that were the case, the downturn would not have been strongly under way since long before the election.


I'd bet my last dollar on a super profit tax never, ever applying to the banks.
Even if it did, it would only be passed on to customers, and governments know this. Completely counterproductive imo.


And here you have the essence of this whole discussion.
We all know the SP is a consequence of market sentiment. Nothing more complicated than that. And it's a self-perpetuating concept.
So you can have the best managed company ever, with apparently solid fundamentals, but if the market doesn't believe in it, you will simply not see the SP rise.

And for my last comment on Telstra I will use Julias' last paragraph above. It is hard to change market sentiment

 

[boofhead]

sptrawler: Telstra pricing for ADSL and that of competition suggests Telstra has good markups. IT also appears that the Telstra wholesale charges can be a significant part of the cost for competition. International traffic is cheaper with expensive submarine cables.

The current system sees competition install DSLAMs where profitable, compete with Telstra's recently competitive plans, make profits and DSLAMs are paid for within a 2-3 years. That would suggest with Telstra's previous pricing the DSLAM buildout would already be paid for.

Some of Telstra's issues comes back to it appears they only competed against Optus and bundling of everything. Meter uploads. Trying to use only media content and not services for value adding. Customer support issues. If you're planning on getting large overall marketshare you're going to have a lot of customers that know little about technical aspects of broadband and trouble shooting. Offhshoring support = visible cost savings but it turns people away. Accent issues do not help support issues.

 

[BrightGreenGlow]

Why is the currently depressed SP just due to the political uncertainty?
If that were the case, the downturn would not have been strongly under way since long before the election.

The downturn was always the political uncertainty.... we were going to the polls every few days lol....

 

[sptrawler]

Well boofhead, now the election is settled, we can get back into it. I noticed the other day in one of the national papers, a Telstra exchange is being pulled down to build a hospital. The "competition "is screaming, what about our equipment it is set up to freeload on the copper network and now all the infrastructure is changing to fibre. Guess the other providers will have to start and spend money on fibre compliant freeload instead of copper freeload(thats gonna cost). I bet you a pound to a pinch of $#1t Telstra has no problems converting to fibre.:

 

[boofhead]

I'm sure the exchange issue will be brought up in federal parliament. Within 8 years the competitors will have access to the fibre as long as Labor can hold on. I'm sure ACCC and other authorities will have their bit to say too. Pressure will be put on Telstra to open it up to competition and possibly have fibre deployments regulated as a means to stop Telstra from damaging competition.

 

[BrightGreenGlow]

Sure the government welcomes cheaper communication prices for it's people to gain support however why continue to crush an Australian company over the likes of foreign owner entities?

 

[boofhead]

Foreign? AAPT is crumbling. Optus/Singtel seems to be the only major international to gain from it. Much of the other competiton is Australian owned. Oh, forgot about Primus. Seems the masters are killing something that has so much more potential.

Telstra's pain comes party because of self infliction but mostly how in the past the political masters were more interested in rhetoric. The privatisation and legislation was designed to try and not properly do anything about telecommunications to look after Telstra. Unfortunately we can't play out alternative realities if different approaches were taken from retaining full public ownership to full own open slather competition.

In the short term the fibre replacing the exchange with copper relives the Optus + Telstra cable rollout if competition want access to the same customers. Duplication.

 

[sptrawler]

Telstras problem is to convince the general public they are now a reasonably priced alternative. If they can do that and stay under the ACCC radar they are on a winner.
They will no longer be the wholesaler but will still recieve rent for the wholesale infrastructure. Also now that the deal with the independants requires the NBN roll out to start in the regions, means the loss of Telstra fixed line customers will be slower. I would think their shareprice will head up to $3.40 again quite quickly.

 

[malachii]

Telstras problem is to convince the general public they are now a reasonably priced alternative. If they can do that and stay under the ACCC radar they are on a winner.
They will no longer be the wholesaler but will still recieve rent for the wholesale infrastructure. Also now that the deal with the independants requires the NBN roll out to start in the regions, means the loss of Telstra fixed line customers will be slower. I would think their shareprice will head up to $3.40 again quite quickly.

Head to $3.40 based on what - that they will lose money slower????????

malachii

 

[Boggo]

Head to $3.40 based on what - that they will lose money slower????????

malachii

They are going to install fibre and then dig up the (originally taxpayer funded and handed to them on a platter) copper and sell it.
That's their best chance of making a buck.
Only potential problem is that you will have to bid for it via a call centre in India or Malaysia but they will assure you that it will be delivered within three working days

 

[sptrawler]

With the N.B.N taking over the cost of rolling out cable in greenfield sites and carrying the cost for rural roll out. Telstra not having to fund the universal service obligation and still retaining the higher margin high population areas while loosing the low margin rural, low density areas first. One would think that Telstras costs should drop faster than revenues thereby improving the net bottom line.
Time will tell, having the dearest plans and still making $3.8b profit and a P.E of 9 with a dividend of 10%, should attract some interest. The test will be how Telstra drops prices without loosing margins and still keep the ACCC onside. The thing in their favour is the Optus network is bogged down with all the other providers piggy backing on it. Optus wireless is useless during peak times see what happens if Telstra is allowed to offer competing deals.
As I said time will tell.

 

[WMD]

With the N.B.N taking over the cost of rolling out cable in greenfield sites and carrying the cost for rural roll out. Telstra not having to fund the universal service obligation and still retaining the higher margin high population areas while loosing the low margin rural, low density areas first. One would think that Telstras costs should drop faster than revenues thereby improving the net bottom line.
Time will tell, having the dearest plans and still making $3.8b profit and a P.E of 9 with a dividend of 10%, should attract some interest. The test will be how Telstra drops prices without loosing margins and still keep the ACCC onside. The thing in their favour is the Optus network is bogged down with all the other providers piggy backing on it. Optus wireless is useless during peak times see what happens if Telstra is allowed to offer competing deals.
As I said time will tell.

Telstra's fix-line margin will shrink as NBN rolls out, mobile network doesnt have the scale advantage nor the cash flow contribution as the copper network. Competition will be fierce in broadband, telephony and media... Add to that D/E at 100... uncertainty around the entire industry... It is really hard to get excited about Telstra, nor can one imagine the dividend can be maintained at current levels.

 

[Boggo]

Roger Montgomery has an interesting view and (accurate ?) valuation on TLS.

http://www.youtube.com/watch?v=GLXCTxsmGYg&feature=related

and

http://www.youtube.com/watch?v=znEo2OXl_fU&feature=related

 

[nulla nulla]

The share price is hard to follow atm. I can understand the price being pushed down on the back of the forecast revenue down grades, due to drop off in fixed line income streams. Also the recent uncertaintity of the federal election outcome and the future of NBN roll out didn't help.

However the election is over and there is no reason to consider that the Labor government can whelch on the $11billion deal. This combined with the float off of Soufun Holdings P/L with a potential realization to tls of between US$400 million to US$425 million makes me think tls will be very cashed up in the near future.

It remains to be seen whether this cash will be used to:

1. Retire debt;
2. Go on an acquisition splurge;
3. Do a share buyback; and/or
4. Make a special div to share holders.

I highly doubt option 2. I suspect option 1 and/or option 3 are the more likely outcomes although it would be good to see them do a special div to return some of their surplus cash to shareholders.

The retirement of debt would have the benefit of reducing operating finance/interest cost and in turn would improve the earnings per share for share holders and help maintain dividends. It wouldn't hurt tls to let the public know their intentions, which inturn could help slow the decline in the share price.

 

[BrightGreenGlow]

From all reports from colleagues and friends Telstra has improved their customer service in leaps and bounds. I know for a fact that Vodafone has stuffed me around for the last time and I'll be switching to Telstra when my plan runs out. Im doing this for two reasons.

1. TLS mobile plans have dropped and are more competitive. This is a fact.
2. Their NextG service dominates all regions outside of capital cities.

I believe because of their far superior mobile network TLS will gain profits from new 'fed-up-with-2nd-rate-providers' mobile customers transferring to TLS. Once the NBN is finalised and signed surely the SP will rise like it did a few months ago when the announcement header was put to the media.

Digital media (foxtel) will only grow in popularity and if TLS has somehow drop their margins I don't see why TLS in a years time wouldn't be a $3.50 cheap share.

Oppinions?

Also, when do you guys think the NBN final signing will take place?

 

[nulla nulla]

Long as I remember The share price has been coming down.
Clouds of myst'ry pouring Confusion on the ground.
Good men through the ages, Trying to find its worth;
And I wonder, Still I wonder, Who'll stop the fall.

(with thanks to Credence Clearwater Revival: "Who'll stop the rain").

Closed tonight on $2.75, starting to ask myself "How low it can go, or can it bounce from here?"