Australia | Aug 08 2006
By Greg Peel
I can do no more here than quote Intersuisse:
“Most investors like to see a clear long-term strategy, well communicated, with evidence of its successful and steady implementation. Most also like to respect their company management and appreciate its astute understanding of and handling of its business environment and relationships.
“Does the average investor have such sentiments towards Telstra? Does the government, as another investor?
“If the government decides to get out, do you want its stake? If the government stays in, does that persuade you to do so also?
“We answer No, No, No, No.”
Intersuisse suggests Telstra (TLS) is under pressure, and rates the stock “Sell – unless addicted to dividends”. This was a downgrade from the previous rating of “Hold for Yield – better opportunities elsewhere”.
Having reached an impasse with the ACCC on FTTN, Telstra has supposedly “binned” the project. Telstra is still at an impasse with the ACCC on how much it can charge on its ULL network. Everything is going nowhere.
Intersuisse notes that while Telstra has been cutting its costs, its revenues are falling. Revenues are declining from its traditional fixed line services faster then broadband, mobile and Sensis can make up. These revenues are the “life blood” of dividend payments, says Intersuisse.
Without capex spend Telstra will be going nowhere, but in theory the major capex project has just been scrapped. Shareholders need to be convinced Telstra can continue to maintain dividends that place it in the realm of property and infrastructure trusts by comparison of yield.
Intersuisse believes that unless a shareholder really needs that income, or doesn’t want the tax implications of a sale, they should just get out now.