TEL (Telecom NZ Ltd)

[Snoopy]

quote:Originally posted by hiawatha


quote:So here is my question. Does the pricing revealed today ($NZ16.49 urban and $NZ32.20 non-urban) refer to *only* local loop unbundling, or does that refer to naked DSL as well?

I'm only speculating, but Telecom charges $40 odd for POTS and $30 (minimum) for DSL. Allowing for administrative overhead and profit, it may be that the determinations of $16.50 and $32.50 are the approximate direct costs of providing these services. Presumably, other operators could offer both services for $70.00 (or a bit less depending on how efficient they are); or just offer the DSL service for $30.00, even to someone who was not subscribing to a POTS service from anyone. This then would be "naked DSL".
hiawatha


$32.50/$16.50 the 'deemed cost' of POTS AND for DSL Hiawatha? My inkling is that those prices include no DSL at all, but I am happy to be proved wrong!

IMO a third party company offering their own 'Naked DSL' would have to cover both the cost of their own broadband equipment, the rental cost of putting that broadband equipment in a Telecom box and *also* some kind of connection charge for use of the Telecom copper network. I think the term 'naked DSL' is misleading as it implies a third party telco can just bypass the copper network with their own equipment as though it didn't exist. A user still has to connect to the copper network in some sense, 'naked DSL' not withstanding. And there will be a charge for this. The Commerce Commission will tell Telecom what this connection charge is, and what rental Telecom can charge for housing competitors equipment in a Telecom box. But does he third party telecommunications company have to pay Telecom $32.50/$16.50 to plug a customer into the their own 'naked DSL' pipeline, or is the charge some other figure yet to be released?

SNOOPY

[Kropotkin]

"The draft determinations set monthly rental charges for access to the local
loop service at $16.49 per month for urban areas and $32.20 per month for
non-urban areas. The draft charge for the transfer of a customer to the UCLL
service is set at $83.70."

This was misreported on the news last night as denoting future consumer costs for DSL service.

As noted by Snoopy, these rates reflect base charges (as drawn up by ComCom) that the govt. deems acceptable for TNZ to charge 3PSPs for infrastructure usage - essentially a connection fee levied per copper pair.

'Naked' or 'dryloop' DSL service provisioning is a separate issue, relating to PSTN services (or lack of) from the exchange over that copper.

Essentially, dryloop is opening up the market for 3PSPs to run VoIP services without the need to have a TNZ split POTS tone line provisioned (currently as $36/m).

I would be interested to see what ComCom based their figures on (as per Snoopys above notes re rural access) given NZ's fairly unique situation - geographic (non-continental, 'tyranny of distance'), teledensity etc.

I strongly suspect they just looked at Norway.

Then again, whoever said the govt. was capabale of rational decision making. Definitely a pre-election beatup IMHO.

This decision was a shot across the bow. My bet - access will be settled art around $22-25 per pair.

[Snoopy]

quote:Originally posted by Kropotkin

"The draft determinations set monthly rental charges for access to the local loop service at $16.49 per month for urban areas and $32.20 per month for non-urban areas. The draft charge for the transfer of a customer to the UCLL
service is set at $83.70."

This was misreported on the news last night as denoting future consumer costs for DSL service.


I very much appreciate your informed opinion Kropotkin. I thought myself that the media had somehow misinterpreted this whole announcement.


quote:
As noted by Snoopy, these rates reflect base charges (as drawn up by ComCom) that the govt. deems acceptable for TNZ to charge 3PSPs for infrastructure usage - essentially a connection fee levied per copper pair.

'Naked' or 'dryloop' DSL service provisioning is a separate issue, relating to PSTN services (or lack of) from the exchange over that copper.

Essentially, dryloop is opening up the market for 3PSPs to run VoIP services without the need to have a TNZ split POTS tone line provisioned (currently as $36/m).


I am still confused on what this announcement means for 'Naked DSL'.
Is there going to be a separate announcement on 'Naked DSL'? Or is this it?

AFAIK whether 'Naked DSL' happens is entirely up to third party telecommunications companies. The Commerce Commission can't force any company to provide 'Naked DSL'. The Commerce Commission can force Telecom to not charge an exhorbitant rental to a third party telecommunications company wanting to put their own equipment into a Telecom box. This they have done. But that is not the same as setting an access charge for 'Naked DSL'.

'Naked DSL' means you can do away with your 'phone tone' and routing your phone calls through Telecom's switching equipment. But that doesn't mean you can do away with your phone line! Any third party equipment will still connect to their customer's premesis and the rest of the network via Telecom owned copper wire. What is the rental charge for that? $16.49 per month for urban areas and $32.20 per month for non-urban areas? Or is it yet to be announced?


quote:
I would be interested to see what ComCom based their figures on (as per Snoopys above notes re rural access) given NZ's fairly unique situation - geographic (non-continental, 'tyranny of distance'), teledensity etc.

I strongly suspect they just looked at Norway.


No need to speculate. You can go and look up the comparative figures for yourself. Just go to:

http://www.comcom.govt.nz

Click on the Telecom Access decision story on the right, find the 'local loop' link in the full article and click on that. There you will find all of the Commerce Commissions work, split up into downloadable pdf bytes. The information you seek is in the appendices D, F and G IIRC. This is where I got the comparative numbers I quoted from. But there was a lot more information over and above what I quoted. I can't remember if Norway was there specifically. But there was a lot of info there from European countries.


quote:
Then again, whoever said the govt. was capable of rational decision making. Definitely a pre-election beatup IMHO.


The government made the umbrella decision to unbundle. The pricing decisions are being made by the Commerce

[Snoopy]

Here is some more confusion. But at least I am getting closer to whatever technical wavelength the Commerce Commission is on, I think! I have just read the Stockness Monster Telecom 11th July announcement from the Commerce Commission on:

"New bitstream access price for CallPlus and ihug"

from which I quote:

"The amended decision makes changes to the methodology for calculating the price payable to Telecom for the service. The new access price for the June quarter is $26.35, with further price adjustments for earlier periods."

"This Decision is for a bitstream access over a circuit provided by Telecom between an end-user's premises and an ATM switch. This circuit is used by a telecommunications provider to deliver retail broadband services. A telecommunications provider must supply other components including national and international transmission, connection to the internet and ISP services."

"Following last year's changes to the Telecommunications Act, the bitstream service has been replaced by a more comprehensive service. CallPlus and ihug can choose to keep receiving the bitstream service until 22 June 2008, or receive the new service when it is available under a new Standard Terms Determination for bitstream issued by the Commission."

"Telecom will be required to supply bitstream services under the upcoming Unbundled Bitstream Access (UBA) Standard Terms Determination (STD). There is therefore the potential for different prices under Decision 582 and the UBA STD for the same bitstream service."

I take this to mean that in order to supply 'Naked DSL', the Commerce Commission will regulate "Unbundled Bitstream Access" (UBA). This is not the same thing as Local Loop Unbundling (LLU). That means the Commerce Commission is yet to report on "Unbundled Bitstream Access" (?).

Now here is the mystery. Why would the Commerce Commission decide that a fair price for 'the bitstream service' is $26.35 per month. Yet a mere two weeks later decide that a fair price for local loop access quote "a more comprehensive service" was $16.49, as released yesterday! A 40% reduction in price for a better service completely trumping a decision being made just two weeks earlier makes no sense to me. Can anyone fathom what is going on here?

SNOOPY

[Kropotkin]

To clear things up, as dicsussed by Snoopy and Hiawatha - LLU / UBA / Naked DSL are separate issues but not entirely unrelated.

LLU - breaking the copper services monopoly.

UBA - allowing 3PSPs to retail TNZ DSL (possibly HSI at a later stage) services, TNZ acting as the wholesaler. Unbudled from any TNZ PSTN offering.

'Naked DSL' - allowing 3PSPs to retail their own DSL/HSI using their own infra plugged into TNZ exchanges. Unbudled from any TNZ PSTN offering.


In response - SNOOPY:

"I am still confused on what this announcement means for 'Naked DSL'.
Is there going to be a separate announcement on 'Naked DSL'? Or is this it?"

The announcement means nothing for Naked DSL per se.

"The Commerce Commission can force Telecom to not charge an exhorbitant rental to a third party telecommunications company wanting to put their own equipment into a Telecom box. This they have done. But that is not the same as setting an access charge for 'Naked DSL'."

Entirely correct. Again the proposed post-LLU access charges as listed have nothing to do with 'Naked DSL'. As noted the rates shown are access only (essentailly a line lease) of TNZ infrastructure.

"The government made the umbrella decision to unbundle. The pricing decisions are being made by the Commerce Commission, not the government!"

Forgive me, but I think this comment is a little naive. I find it improbable to have essentially a monopoly situation, with regulatory requirement in the form of the Kiwi Share, and not have the issue being politicised.

This is "bread and circuses" politics (albeit that I essentially agree with the LLU arguement).

"A big increase over the $16.50 first shot! Why do you think it will go up so much Kropotkin? Remember this isn't a negotiated settlement! Whatever the commerce commission decides, goes."

This will be a protracted negotiation. What it comes down to is brinksmanship.
My reasoning as follows:

1. How much devaluation caused by state interference will the electorate put up with? (i.e Mum and Dad investors) - not to mention ACC/Cullen fund.
2. How much regulation will the offshore institutionals take before dumping?
3. What will encourage other vendors to enter the market if ComCom proves to heavy handed at this juncture?
4. I suspect the State will not want to be forced into a position of purchasing the network to ensure service a la Transrail/TOLL
5. If the network is re-nationalised by government fiat to avoid a market purchase (worst case and highly unlikely), say goodbye to foreign $$$ infrastructure investment.

Im my experience the following axiom still holds:

"What's mine is mine, what yours is negotiable." :D

[Snoopy]

quote:Originally posted by Kropotkin

To clear things up, as discussed by Snoopy and Hiawatha - LLU / UBA / Naked DSL are separate issues but not entirely unrelated.

LLU - breaking the copper services monopoly.

UBA - allowing 3PSPs to retail TNZ DSL (possibly HSI at a later stage) services, TNZ acting as the wholesaler. Unbundled from any TNZ PSTN offering.

'Naked DSL' - allowing 3PSPs to retail their own DSL/HSI using their own infra plugged into TNZ exchanges. Unbundled from any TNZ PSTN offering.

In response - SNOOPY:

"I am still confused on what this announcement means for 'Naked DSL'.
Is there going to be a separate announcement on 'Naked DSL'? Or is this it?"

The announcement means nothing for Naked DSL per se.

"The Commerce Commission can force Telecom to not charge an exhorbitant rental to a third party telecommunications company wanting to put their own equipment into a Telecom box. This they have done. But that is not the same as setting an access charge for 'Naked DSL'."

Entirely correct. Again the proposed post-LLU access charges as listed have nothing to do with 'Naked DSL'. As noted the rates shown are access only (essentially a line lease) of TNZ infrastructure.


OK I think I am getting there. A customer specifying 'Naked DSL' from a third party telecommunications supplier will end up paying:

i/ The cost of accessing the Telecom owned copper network ($NZ16.50 if you live in the city).
ii/ The cost (including depreciation) of running the DSL equipment installed by the third party supplier.
iii/ Any profit margin the third party Telecommunications supplier decides they can add to the bill.

Thus we can expect no further announcement from the Commerce Commission on 'Naked DSL', because indirectly (through LLU) they have already covered it. Have I got that right?


quote:
"A big increase over the $16.50 first shot! Why do you think it will go up so much Kropotkin? Remember this isn't a negotiated settlement! Whatever the commerce commission decides, goes."

This will be a protracted negotiation. What it comes down to is brinksmanship.
My reasoning as follows:

1. How much devaluation caused by state interference will the electorate put up with? (i.e Mum and Dad investors) - not to mention ACC/Cullen fund.
2. How much regulation will the offshore institutionals take before dumping?
3. What will encourage other vendors to enter the market if ComCom proves too heavy handed at this juncture?
4. I suspect the State will not want to be forced into a position of purchasing the network to ensure service a la Transrail/TOLL
5. If the network is re-nationalised by government fiat to avoid a market purchase (worst case and highly unlikely), say goodbye to foreign $$$ infrastructure investment.


I guess if the regulations get too onerous Telecom will simply ring fence the network inside a separate company and distribute it pro-rata to existing shareholders. If 'Networkco' subsequently looks like going bust, then the government might be forced to bail it out, just like they did with Air New Zealand.

That IMO is one reason the government won't want to see the Commerce Commission 'turn the screws' too much. But whether the government can control exactly what the Commerce Commission does is another matter.

SNOOPY

PS All this chaos and uncertainty over LLU has proved too much for me. Telecom hasn't hit my 'stop buy' yet. But I decided to buy a few more Telecom shares today anyway.

[Kropotkin]

quote:i/ The cost of accessing the Telecom owned copper network ($NZ16.50 if you live in the city).
ii/ The cost (including depreciation) of running the DSL equipment installed by the third party supplier.
iii/ Any profit margin the third party Telecommunications supplier decides they can add to the bill.

Thus we can expect no further announcement from the Commerce Commission on 'Naked DSL', because indirectly (through LLU) they have already covered it. Have I got that right?

Dead on the money.
The only further comments likely to emerge from ComCom will be relating to the compliance commitment timetables - watch this space around the end of August.

Most of the noise is likely to be coming from TUANZ.

quote:I guess if the regulations get too onerous Telecom will simply ring fence the network inside a separate company and distribute it pro-rata to existing shareholders. If 'Networkco' subsequently looks like going bust, then the government might be forced to bail it out, just like they did with Air New Zealand.

A correct analysis. Without significant market drivers Netco is unlikly to exist as a market entity. This will become a political decision. I challenge the State to be able to force institutional investors in a private company to swallow a loss and maintain any liberal-market cred.

My prediction:

1: Pro-rata will lead to a firesale of Netco (sub $1.0Bn) and a pickup offshore (my bet Alcatel-Lucent/Deutsch Telecom or Ericsson/NTT)
2: Telecom divest Netco for $2.0 - $2.5Bn to the State - nice payout for holders to offset significant devaluation over the last 6 years courtesy of Ms. Gattung

1 to 1 conversion to new Telecom Mobile entity shares/notes with 0.25 conversion to Telecom Wholesale. 26%+ of Wholesale purchased at a nominal rate on top of the Netco payout by the State to be added to the Cullen fund!

What better way to spend a whopper surplus than to buy back the family jewels so you can sell 'em again in 10years time! ;)

[Bobby_Fischer]

quote:Originally posted by Kropotkin


quote:i/ The cost of accessing the Telecom owned copper network ($NZ16.50 if you live in the city).
ii/ The cost (including depreciation) of running the DSL equipment installed by the third party supplier.
iii/ Any profit margin the third party Telecommunications supplier decides they can add to the bill.

Thus we can expect no further announcement from the Commerce Commission on 'Naked DSL', because indirectly (through LLU) they have already covered it. Have I got that right?

Dead on the money.



For "Naked DSL" (DSL without POTS), ain't the third party going to have to pay Telecom some kind of top-up "line rental" in addition to the $16.49? If the consumer wants DSL over the ULL from a third party WITH Telecom's POTS the consumer still pays Telecom the line rental (some fraction of which, in theory, pays for the copper and the rest pays for network access, directory listing, 111 service, etc, etc). If the consumer doesn't want POTS, they won't want to pay Telecom a line rental, so Telecom will want to get that extra wire charge component of the POTS rental passed on through the third party, surely?

[Kropotkin]

quote:For "Naked DSL" (DSL without POTS), ain't the third party going to have to pay Telecom some kind of top-up "line rental" in addition to the $16.49?

I suspect any form of wire maintenance provision has been rolled into ComComs figures.


quote:If the consumer wants DSL over the ULL from a third party WITH Telecom's POTS the consumer still pays Telecom the line rental (some fraction of which, in theory, pays for the copper and the rest pays for network access, directory listing, 111 service, etc, etc).

This is likely to be business as usual for PSTN service provisioning given that there are unlikely to be any non VoIP entries to the market.
PSTN has rougly 12-15 years of investment life left.
Interestingly, this blows the whole (unqualified) "farmers are crying out for DSL" arguement out the window.
No Telco is going to invest in DSLAM insfratructure for rural users - it's completely uneconomic.
The real question I beleive is will rural folk get any significant PSTN services without continuing subsidy from urban areas?

Note:
Wire maintenance = from the pole to your abode (insurance).
Network access = covered as a proportion of the current account model ($36/m)
Infrastructure maintenace = as above
Dir listing = historically as above but may be now under YPG control. Look to be charged for this in future :D
111 service = historically as above (infrastructurally) but look for this to be a tax, possibly under an upped ACC levy




quote:If the consumer doesn't want POTS, they won't want to pay Telecom a line rental, so Telecom will want to get that extra wire charge component of the POTS rental passed on through the third party, surely?

As noted above, I expect any maintenance component to be included in ComComs base access figures.

[Kropotkin]

Naked DSL capable? Yes - given further technology investment (but with no tangible market benefit as the incumbent). Once again this becomes a regulatory, market-entry issue.

VoIP in the pipeline? Absolutely. TNZ would be foolish not to.

The market has been aware of TNZ's intentions via their fairly well publicised NGT approach.

The real question will be who's waiting in the wings to enter the market as 3rd primary provider of GSM/UMTS services, and additionally WiMAX uptake over the next 24-30 months.

Virgin or Orange?... or maybe a play by Hutchinson to leverage their existing relationship TNZ?

Changes are afoot....

[Snoopy]

quote:Originally posted by Kropotkin


quote:i/ The cost of accessing the Telecom owned copper network ($NZ16.50 if you live in the city).
ii/ The cost (including depreciation) of running the DSL equipment installed by the third party supplier.
iii/ Any profit margin the third party Telecommunications supplier decides they can add to the bill.

Thus we can expect no further announcement from the Commerce Commission on 'Naked DSL', because indirectly (through LLU) they have already covered it. Have I got that right?

Dead on the money.
The only further comments likely to emerge from ComCom will be relating to the compliance commitment timetables - watch this space around the end of August.

Most of the noise is likely to be coming from TUANZ.


It looks like we are wrong Kropotkin. This announcement from Telecom today:

"In February and March 2007 the Commerce Commission initiated standard terms processes for LLU, LLU co-location, and unbundled bitstream access (including "naked DSL"). Telecom was required to put forward standard terms for these services in June and July 2007, which it has now done. We expect the Commerce Commission to issue draft determinations for LLU and co-location at the end of July and Bitstream in August."

The unbundled Bitstream announcement has yet to be released by the Commerce Commission! That is the important one for naked DSL pricing. The LLU announcement must refer to the wholesaleing of traditional services only. Do you concur?

SNOOPY

[Kropotkin]

As per TNZ:


quote:We expect the Commerce Commission to issue draft determinations for LLU and co-location at the end of July and Bitstream in August."

I inadvertantly set you wrong here.

This is what I meant by "The only further comments likely to emerge from ComCom will be relating to the compliance commitment timetables - watch this space around the end of August."

Apologies for the confusion! [:o]
Mea Culpa - I didn't mention the financial\wholesale aspect assuming that people ouside the industry would be aware that the compliance\time-to-market issues were implicit in ComComs decisions. Definitely my bad.


quote:The unbundled Bitstream announcement has yet to be released by the Commerce Commission! That is the important one for naked DSL pricing. The LLU announcement must refer to the wholesaleing of traditional services only. Do you concur?

From my reading of the announcements so far, LLU and co-location has already been settled. Essentially this is dealing with infrastructure, therefore relating to fixed costs of the network.
So I think that it covers 'traditional' (i.e POTS and existing DSL services) from the infrastructure perspective, if you get my drift.

UBA is esentially the TNZ DSL wholesale mechanism (i.e how much can be charged by the incumbent to allow 3PSPs to the existing DSL service).

As noted previously, 'Naked DSL' is DSL minus POTS along the same copper. I'm not sure what ComCom can further announce regarding this tbh, other than that TNZ must provide the capability and no barriers to entry.
I'm fairly sure that the 'access' pricing as such was covered under the previous announcement.

I hope I'm making sense here!

[beacon]

Funny how a result better than analyst predictions, better dividend payout and upcoming capital return, alongwith impending buys from Kiwisaver schemes have collaboratively managed to push the price down to a screaming buy - in my eye anyway. Talk about markets being efficient. I obliged by buying more. Either the market or I are having an irrational day. Time will tell...

[Snoopy]

Telecom result released and the share price drops to $4.39!!??

What the?!!? Anyway I think I just increased my Telecom holding again as $4.40 was my 'stop buy' price.

There were a couple of things in the result that were not good. Mobile growth rate, a driver of earnings in recent times was only 5%.

"Mobile revenue increased by $42 million (5.4%) for 2007 and by $1 million (0.5%) for Q4 2007 compared to the corresponding periods in the prior year."

So the growth engine has stalled. But this has to be taken in context of the large increase in mobile division sales over he last year. These figures are indicating a lower profit increase, not a profit decrease.

Also not a good revenue story from Australia (?):

"Total calling and resale revenue decreased by $31 million (4.4%) for 2007 compared to the corresponding period in the previous year following a decrease of $11 million (6.3%) in Q4 2007. This was principally the result of declining revenue from national calls, partially offset by growth in resale revenue not in Q4 2007."

This has to be one of the most badly phrased paragraphs in corporate reporting I can ever remember. I had to read it several times before I think I understood what it was saying and even now I'm not sure!

Previous to purchasing Powertel in April 2007, Telecom has been wholesaling Powertel product. Thus part of the reason for the collapse in 'resale revenue' is because Telecom now own Powertel outright. That means that what were 'resales' now become 'sales'.
This IMO is why the above paragraph ends in such an extraordinary way

"principally the result of declining revenue from national calls, partially offset by growth in resale revenue *not* in Q4 2007."

The period "not Q4" refers to Q1, Q2 qnd Q3 *before* the Powertel acquisition. Thus IMO this paragraph is saying AAPT has done quite well in resale revenue for Q1, Q2 and Q3, without Powertel. Thus the alarming headline calling and resale revenue decline of 6.3% in Q4 reflects the acquisition of Powertel and the reclassification of resales to sales. Not a decline in the overall Australian business operation!

Later on another quote

"The active Consumer fixed line customer base at 30 June 2007 of 378,000 decreased by 14.9% compared to the prior year. This has resulted in a 7.5% decrease in total services to 738,000 compared to the prior year."

Again this superficially sounds bad. But given that AAPT were losing money in Australia, this looks like a weeding out of their less profitable customers: actually good news for the profitability of the company.

Customers on 'bundled offerings' have increased from 51% to 63%. And the integration of 'Powertel' will increase revenue for the future.

Also of interest was the profit on the Yellow Pages Group sale: $2.084b (previously we had only had the sale price of $2.161b). That means the book value of the YPG asset was only $77m before the sale - incredible! That means net benefit unlocked to shareholders as a result of the Yellow Pages sale was $1.06 per share.

Back to the regular business and the transitional year in NZ has been an absolute cracker, for which the fourth quarter with no YPG, is the most representative.

"Adjusted net earnings for the quarter ended 30 June 2007 ("Q4 2007") were $256 million, compared to $203 million for the quarter
ended 30 June 2006 ("Q4 2006"), an increase of 26.1%."

On p51 of the FY2006 annual report Telecom made the following prediction:
"Telecom currently expects net earnings after tax, excluding abnormal items for FY2007 to be within the range of $820m to $860m."

Whereas today they reported

"Excluding the impact of abnormal items, adjusted net earnings
for 2007 of $955 million represents an increase of 16.5% on adjusted earnings for 2006 of $820 million."

It is fortunate indeed for we shareholders that Telecom got their result projections so badly wrong!

Final dividend is a bumper 14.5c, greater than even I expected. Add that to the capital return, equivalent to 54cps, and the equival

[duncan macgregor]

quote:Originally posted by beacon

Funny how a result better than analyst predictions, better dividend payout and upcoming capital return, alongwith impending buys from Kiwisaver schemes have collaboratively managed to push the price down to a screaming buy - in my eye anyway. Talk about markets being efficient. I obliged by buying more. Either the market or I are having an irrational day. Time will tell...
I think its funny that you think its a screaming buy. Here we have a company going from bad to worse, selling the most profitable part of the business. The govt is changing the rules to open the business up for competition, the profit is down, it will be down a lot further next year. Its not important about this being right, and that being wrong or they should do this or that. What is important is the sp has been on a downtrend for years losing you money. Thats all that matters, not the rights or wrongs or how much a dividend they pay to keep the dummies happy as their capital erodes. Yake a look at the TEL thread over the years. with all the useless fundamental analysis from posters whose capital has eroded as fast as the dividends paid. The share price was over double what it is now, with the same posters bleating about dividends. Macdunk

[beacon]

Uncertainity yes, Duncan - Demise, I think not.

[beacon]

Snoopy. Outstanding shares will decrease by a ninth next fin year

[Snoopy]

quote:Originally posted by duncan macgregor


I think its funny that you think its a screaming buy. Here we have a company selling the most profitable part of the business.


Yes but they got a good price for it Duncan. The profit after tax for YPG for FY2007 is something like $NZ120m. Telecom got $2.2 *billion* for this. That is a PE of 18.

You go on about me not having an exit strategy for Telecom. But I have consistantly said that if I was offered well north of $7 for my shares then I would seriously consider selling.

$7 plus for TEL is a PE of 18+. IOW I am in total agreement with Telecom that selling YPG was the right thing to do, but only because they got the right price for it.


quote:
The govt is changing the rules to open the business up for competition,


Yes, but the final network access pricing isn't set yet. The Telecom share price is being driven by fear, not fact.


quote:
the profit is down,


Not true. The underlying profit is UP by 16.5%

"Excluding the impact of abnormal items, adjusted net earnings
for 2007 of $955 million represents an increase of 16.5% on adjusted earnings for 2006 of $820 million."


quote:
it will be down a lot further next year.


I agree the profit will be down next year, but by how much? Depending on your answer, that depends on whether any share price weakness is a buying opportunity or not. Personally I think profit will be down. But not by 'a lot'.


quote:
Its not important about this being right, and that being wrong or they should do this or that. What is important is the sp has been on a downtrend for years losing you money. Thats all that matters, not the rights or wrongs or how much a dividend they pay to keep the dummies happy as their capital erodes.


But who has been holding the shares for years and years? If that is what *I* had been doing my average entry price would be $7.50 or something. My entry is way less than that.

Your continual denial of dividends as a return source will just lead to the misallocation of your investment capital Duncan. So far this century Telecom has returned $2.37 per share in dividends and capital returns to shareholders. In another couple of months that tax paid cash return will be over $3 per share! You can't hope to make any intelligent decisions on any investment in Telecom if you just ignore such figures.

Investment is a continuous evaluation process based on the discounted value of future cash flows and the price you can buy those cashflows at. It is not a certain process and sometimes you will 'get it wrong'. It is not an easy process. You cannot just assume historical cashflows will continue. But perversely selling out when you get it wrong can be the biggest investment mistake you make. If you wanted to 'sell out' of Telecom, the best equivalent thing to do would be to sit back and rake in the dividends and don't reinvest them. To sell out of the actual cashflow generating engine itself by selling the shares is not the way to go.

SNOOPY

[Snoopy]

quote:Originally posted by beacon

Snoopy. Outstanding shares will decrease by a ninth next fin year


Yes I know. That doesn't make any difference to my projected PE or yield calculations though. The earnings per share will increase in exact proportion to the number of shares that are cancelled.

SNOOPY

[jonny5]

Yow. Talk of mobile regulation. This would be a real kick in the teeth to both VF and TCom.

[Yossarian]

quote:Originally posted by Snoopy
So far this century Telecom has returned $2.37 per share in dividends and capital returns to shareholders.


genuine question - is that $2.37 fully imputed?

[duncan macgregor]

SNOOPY ,Its up to you how you want to go broke, you are definately heading in that direction. When T GATUNG took the helm the sp was over $9-00 now its $4-32 in a market that more than doubled in price. You have bought more and more all the way down. What a waste of time and money, surely you can do better than that. Macdunk

[beacon]

Snoopy. The signal was towards their upward effect on valuation.

[Snoopy]

quote:Originally posted by Yossarian


quote:Originally posted by Snoopy
So far this century Telecom has returned $2.37 per share in dividends and capital returns to shareholders.


genuine question - is that $2.37 fully imputed?


Yes

SNOOPY

[Major von Tempsky]

Strange, passing strange, that MacDunk et al can't get their head around the fact that the typical retail holder of TEL did not pay $9 per share and can't understand gross dividend ratios and imputation...
Maybe its NCEA....

[duncan macgregor]

What i do understand is that if you take snoopies dividends over the last 7 years of $2-37 and add it to the sp of $4-32 you still come up with a figure in the red of $6-69.
Seven years in the red you should just stick it all under the mattress at least you would have less risk. Macdunk

[PointyHat]

ASB (last update 3 Aug) advise that DPS from current 45c to 2007 33c, and 2008 30.5c DPS.
PE 10.1 current, 10.5 2007 and 10.6 2008.
Yeild current 10.5%, 2007 7.6% and 2008 7.1%

This is a changing company that is loosing control of it's monopoly in my opinion due to Helen etc., and most probably will have to grow from take overs now (with little opportunity there) or suffer retraction. God knows why they sold the yellow pages in y opinion.

I think it might be a good "Hold or Buy" again in the future after being over sold over 2007 & 2008. It will be interesting to know what the market considers TEL to be. Surely overseas holders will now get out of TEL with the above figures and the NZ dollar dropping because of the US$ problems!?

[Snoopy]

Snoopy. The signal was towards their upward effect on valuation.

Canceling one in every nine shares still won't do anything for the overall TEL valuation 'beacon'.

If the market values Telecom at $4.30 and

1/ one out of every nine shares are cancelled and
2/$4.88 is repaid for that share cancelled,

then the overall company valuation must still balance by an adjustment in price of the remaining shares. In mathematical terms what I just said is:

8 x T + $4.88 = 9 x $4.30

Where T is the Telecom share price after the share cancellation 'all things being equal'. If we solve that equation for 'T' then the share price should drop to $4.23 for the remaining shares you have left.

Superficially your eight shares will be worth less than the $4.30 they started being worth. But of course you have that $4.88 in the bank to compensate you for that other share you had cancelled which exactly makes up for the apparent drop in value of your TEL shares.

SNOOPY

PS I also need to mention that 'all things are not equal', because the yellow page business has gone. Thus although there are less shares to spread the Telecom profits between, there are also less profits due to the Yellow Pages group being owned by someone else.

[winner69]

Strange, passing strange, that MacDunk et al can't get their head around the fact that the typical retail holder of TEL did not pay $9 per share and can't understand gross dividend ratios and imputation...
Maybe its NCEA....

You have a point MVT .... it was back in 2001 that the TEL price plunged from the infamous highs of $9 odd to the $4.13 which was the low in Nov 2001

Since then the TEL price has ranged from the $4.00 mark to a high of $6.60 which really is the disaster that Macdunk points out.

Interesting that TEL almost back to its 2001 price - just confirms that TEL has only been a yield play (as they said it would be) over the last 6 years - although some have done OK trading the ups and downs

[winner69]

I admit I gave up trying to understand TEL fundamentals years ago. Snoopy does a great job telling us what goes on but it always seems to be glass is half full version. His summary of the TEL result seems to be at odds with what you read in the paper.

I'd tend to go along with these comments in the NZ Herald -

"Adjusted earnings before interest, tax, depreciation and amortisation fell 3.6 per cent throughout the group and 3.8 per cent in New Zealand." which seems at odds to what Snoopy was portraying .... as is this quote from Moutter

" ...the fourth quarter decline of 6 per cent in the New Zealand ebitda was the best guide for the next financial year" .... to me a 6% decline in EBITDA is quite significant when this is likely to be the best case


Never mind .... $4.30 might seem cheap and probably is but I'll leave TEL to the likes of Snoopy et all and the institutions and Kiwi Saver funds who need to have a fair chunk of TEL in their portfolios even though they probably would rather invest elsewhere

[Major von Tempsky]

In my case I got in first at the float, sold out at $8.00 (ok, I missed selling at $9.00 - who cares...) and have bought back in in several parcels at rather less than $6.60 so I'm rather bemused at the allegations that everyone bought in at $9.00 or $6.60.

I'm making a point of reading all the discussion I can find on TEL's result over a period of a week or two rather than rushing to judgment on the basis of some shallow screaming headline writer's knee jerk reaction.
It seems to me that TEL have brought a rather calculatedly cool conservative approach in their comments which is good and I therefore look to TEL exceeding the guidance.
It also seems to me that it's a fiendishly complex situation to the point where the only true comment is that any short comment à la MacDunk is superficial and bound to be wrong.

[Steve]

The release of the proposed access charges also provides more clarity for the crystall ball gazers...

[Snoopy]

Final dividend is a bumper 14.5c, greater than even I expected. Add that to the capital return, equivalent to 54cps, and the equival

-Post Truncated-

NOTE: I managed to get back into the old site to recover the rest of my post on the Telecom result

Final dividend is a bumper 14.5c, greater than even I expected. Add that to the capital return, equivalent to 54cps, and the equivalent current share price is now $4.39-(0.54+0.145)= $3.70.

Adjusting for one offs (the profit gained from Samoan Telecom, Restructuring Costs and Billing issue rectification) then the profit from continuing operations was:

$841.0m + 0.67($-20m+$36m+$16m)= $862m

Forecast group consolidated profit for FY2008 is $680m-$720m. That gives an underlying eps of ($680m-$720m)/1,960= 35-37cps.

That means Telecom is now trading on a projected PE of:

370/(35 to 37)= 10.6-10.0, and at projected dividend yield of:

0.75(35 to 37)/370= 7 to 7.5%.

Taking those figures at face value, you might say that Telecom priced at the equivalent of $3.70 is about right. But it is important to bear in mind the context in which these profit forecasts are being made. Telecom is currently going through a very public negotiation process with the Commerce Commission as regards network access. It would not be a good look to forecast vast profits while doing so.

IMO the most significant sentence in the results presentation is this:

"There is a large amount of uncertainty around these assessments as a number of key determination processes have yet to be completed. The extent of the regulatory, competitive and strategic change has made it difficult to provide reliable estimates of future financial performance. Expectations around future financial performance can and will be subject to material change during the forthcoming year."

This is the 'out' clause Telecom can point back to when their FY2008 profit forecasts turn out to be understated, as happened this year.
Make no mistake I still expect Telecom's profit to fall next year. But depending on the result of Commerce Commission negotiations, not by the 20% that Telecom claim. To me Telecom is a more attractive buying proposition today, all uncertainties considered, that at any time over the last fifteen years.

SNOOPY

discl: Bought more Telecom today.

-End of Repeat Post-

[jke_brown]

From Sydney Morning Herald 2007/08/03

Telecom NZ falls victim to uncertain times

Matt O'Sullivan
August 4, 2007

TELECOM New Zealand has again disappointed investors, who are now facing a fall in dividend in the coming year as uncertainty plagues the company.

New Zealand's largest listed company has warned that pre-tax earnings across the Tasman will fall by up to 8 per cent next year as lawmakers force it to open its telephone network to competitors.

This side of the Tasman, Telecom NZ's operation, AAPT-PowerTel, narrowed its loss to $26 million from $76 million in a "highly challenging" market where retail prices continue to fall and margins remain under pressure. The loss of "substantial" contracts did not help.

Telecom NZ said it would take a 10 per cent stake in Hutchison Telecommunications after transferring its investment in a joint venture it has with the struggling mobile phone operator. It has left open the possibility of increasing its stake in Hutchison to 19.9 per cent.

Although Telecom NZ has promised to keep its dividend at NZ7c (6.26c) per share for the first three quarters in 2007-08, analysts says this translates into an 11 per cent fall in payout because the company is cancelling about 230 million shares next month.

"It's a bit of a disaster," ABN Amro analyst Ian Martin said. Mr Martin said Telecom was either leaving open the possibility of paying a greater dividend in the fourth quarter or it was concerned about the outlook worsening.

The company still has to wait another month before its new chief executive, Paul Reynolds, joins after leaving telecommunications company BT in Britain.

On Friday, Telecom NZ posted a 16.5 per cent rise in underlying earnings to $NZ955 million for the year, thanks to lower tax expenses and depreciation and amortisation costs.

A $NZ2.08 billion gain from the sale of its Yellow Pages directories business helped boost its bottom line net profit to $NZ3 billion. Telecom NZ is set to return $NZ1.1 billion to shareholders from the sale of the directories business shortly.

Telecom NZ's chief financial officer, Marko Bogoievski, said the acquisition of PowerTel in April would have a "significant impact" on the Australian operation's performance next year.

AAPT-PowerTel's chief executive, Paul Broad, had "made quite decisive and appropriate changes" to build a new management team, he said. But Mr Bogoievski cautioned that most of the benefits from the PowerTel acquisition would go towards offsetting the costs of merging the two businesses.

Although opportunities existed to expand the business, Mr Bogoievski conceded he "wouldn't get carried away" because it was more difficult predicting fortunes in Australia than in New Zealand.

Shares in Telecom NZ fell 12c to $3.89, taking its loss over the last two weeks to more than 11 per cent. The company will pay a final dividend of NZ14.5c a share on September 7, taking the full payout for the year to NZ35.5c.

[Deev8]

From Sydney Morning Herald 2007/08/03
Although Telecom NZ has promised to keep its dividend at NZ7c (6.26c) per share for the first three quarters in 2007-08, analysts says this translates into an 11 per cent fall in payout because the company is cancelling about 230 million shares next month.
It's amazing what passes for news in the Sydney Morning Herald isn't it? "Analysts" predicting an 11% decline in the company's total dividend payments - and surprisingly Telecom are buying back and cancelling 11% of the shares on issue.


From Sydney Morning Herald 2007/08/03
ABN Amro analyst Ian Martin said. Mr Martin said Telecom was either leaving open the possibility of paying a greater dividend in the fourth quarter or it was concerned about the outlook worsening.Perhaps he deduced that from the pattern of this year's dividend payments - 7c, 7c, 7c, 14.5c.

It's fortunate that the newspaper consulted an expert for his opinion isn't it?

[Phaedrus]

As for Phaedrus current TEL downtrends what the eff is he on about, he oughtta look at the price occasionally...
http://h1.ripway.com/Phaedrus/TEL88.gif

[mothership]

Just checking to see if the boxes revert to the normal size

[duncan macgregor]

[QUOTE=Major von Tempsky
It also seems to me that it's a fiendishly complex situation to the point where the only true comment is that any short comment à la MacDunk is superficial and bound to be wrong.[/QUOTE]
MAJOR, I will get it wrong sooner or later, but so far if you read the thread back over the years i have been 100% right. To make a mistake is normal, to add to your mistake is plain stupid. To not even knowing you made a mistake or admitting to it makes you blind to reality. If TEL is a hold or a buy to you, it says very little for whatever buy and hold analysis you use, if you look up, where the sp is, was, and has been. You might slip up on chicken entrails but surely you can add and subtract.
Your old mate Macdunk

[winner69]

Last week's plunge apparently lopped 2.1 trillion ddllars off the value of world stock exchanges. I feel sure the companies listed on those exchanges were making much the same profits they always did, and were paying much the same dividends; it is difficult, therefore, to believe that they have actually dropped 2.1 trillion in value. However this seems to be the sort of nonsense to which MacDunk subscribes.
So who is really playing fast and loose with the chicken entrails?
hiawatha

Maybe they were 'overvalued' ..... before the trillions were slashed off the prices.

Isn't 'value' related to 'risk premiums' ..... apply a higher risk factor (ie higher cost of capital) and valuations fall even if everything else stays the same (as you have alluded to)

[Deev8]

In today's Herald:

One of the most significant moments in the long battle for deregulation of the telecommunications market in New Zealand played out this morning in the mundane surrounds of a central Auckland telephone exchange ...

Ihug and Orcon engineers were able to enter Telecom's Ponsonby and Glenfield exchanges in Auckland to install their own telecommunications and internet equipment for testing, so later in the year they can deliver communications services direct to consumers over Telecom's copper lines ...

Telecom is currently preparing to open other exchanges for trials with other Auckland exchanges in Mt Albert, Ellerslie and Browns Bay scheduled to receive service provider equipment for testing in September.

The article is here: Telecom opens gates, lets Trojan Horse in (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10456728)

[duncan macgregor]

The market thinks its a bad thing with the sp dropping on a rising market. be interested to see what happens to the sp when the competition starts competing. Macdunk

[craic]

Bought ten thousand more a few days ago in the certainty that this is one of the safest and best bets on the market. TEL will just upgrade their broadband etc in time to make the opposition eat crow.

[foodee]

TEL will just upgrade their broadband etc in time to make the opposition eat crow.

Craic
Agree. My own quirky thought is TEL is never going to get the whole broadband market, so why not have a bit of what the others have as well!;)

Looking to pick up some today but sp holding up too well.

cheers

[Kropotkin]

Word on the street - another announcment (aka dictat) pending re. unbundled bitstream services.

Looks likely to be 'time-to-market' communique rather than price specific.

Looks like TEL will continue to sit in that uncomfortable space between rock and hard place.

[duncan macgregor]

I think its very nice of telecom to give a million bucks of hard earned shareholder cash to charity. Reminds me of air NZ before the govt rescued it. Macdunk

[Kropotkin]

Announcement imminent....

Looks like big stick rather than carrot mentality from comcom.
Expect aggressive compliance timelines for Naked DSL services

[Snoopy]

I am casting my vote on new CEO Dr Reynolds pay packet today, via the AGM voting form. I have been a (very small) shareholder in BT in the UK for many years so I have been following what Reynolds has been up to in the UK with BT wholesale with some personal interest.

My first impression was that his Telecom base salary of $NZ1.75m - a 40% increase over what Theresa (at $NZ1.25m) got - was outrageous. But Reynolds base pay in the UK as head of BT wholesale was £450,000, near enough to $NZ1.3m. So one couldn't expect Reynolds to take a pay cut to come out all this way. In addition, last year Reynolds received from BT £434,000 as a bonus payment. So given his $NZ package at BT was around $2.6m in FY2007, and that did not include a £170,000 interest free loan, the size of package being offered to Reynolds in NZ looks more reasonable. Nevertheless I will be voting against the bonus share incentive part of Reynold's pay packet at the forthcoming AGM. Here is why.

I don't like the bonus payments of up to 250,000 shares being available to Reynolds over FY2008. For the first part of the current financial year Reynolds did not work for Telecom. So how his performance can have much effect of the Telecom share price beyond the superficial 'not being Theresa Gattung' escapes me. I am not against granting shares or share options to Reynolds. I just don't like the structure of the plan as proposed.

Specifically I would like to see more of a 'three year incentive' rather than an annual target. I agree with the idea of measuring total shareholder returns over the medium term as part of the incentive package. But the idea of giving Reynolds an effective penalty: From p10 of notice of AGM

"If the 50th percentile or greater (comparative performance test) is not met on the initial (annual) test date, then a maximum of 50% of the share rights can be exercised if the performance hurdle is met at re-test. Any unexercisable remaining share rights will immediately lapse."

if the same transition goal from 'monopoly provider' to 'guardian of the wholesale network' is performed in alternative time frames strikes me as bizarre. It seems to me highly likely that the heavy hand of the government will be the main determining factor as to how this transition is made. That is largely outside Reynold's control. So IMO it should also be outside the bounds of Reynold's pay packet.

The other bit I don't like is the out clause referring to 'Fundamental Change', where the terms of employment are materially different to what is set out in his employment agreement. I presume this could be triggered if Telecom Wholesale was to be carved off as a separate company. Chairman Boyd and co have previously threatened this as a real possibility if the government gets heavy handed. Telecom have gone silent on this prospect in recent months. But the last thing I would want to see is Reynolds suddenly leave if something like this happened, taking with him his expertise and shareholder money when Telecom Wholesale needs him most.

The board have issued the veiled threat that if these share incentives are not passed at the AGM the board will be forced to pay Reynolds the equivalent in cash. Well, so be it, at least for FY2008. IMO the share incentives should not start before FY2009 at the earliest.

I will extend a further brickbat to the board for their decision not to publish an annual report, except on the internet. A complicated report like Telecom's is a real pain to deal with on the internet. Try writing notes on the corner of your screen as you flip back and forth between sections. It doesn't really work. Perhaps it is just a ploy to stop the wrinklies asking awkward questions at the forthcoming AGM in Dunedin? I certainly hope Boyd and the board get a bollocking for their decision not to report directly to shareholders via a new loophole in the law. They deserve it.

SNOOPY

discl: hold TEL

[duncan macgregor]

SNOOPY, The internet is the best way to get reports i find. Look at the money they save by doing it this way. Print it out if you want to go over it in detail. Macdunk

[p2r]

MMmm $48 to reconnect at my new house, and $100 odd for what I can get for $60 from vodaphone, $70 from orcon might be motivation to switch!

[shasta]

MMmm $48 to reconnect at my new house, and $100 odd for what I can get for $60 from vodaphone, $70 from orcon might be motivation to switch!

I switched from Telecom Landline/Broadband (still have cellphone contract with them :() & ditched SKY TV, for the Telstraclear package (same deal) & i practically get Saturn/SKY for free!

Telecom have been charging me since April on services they were meant to cut, so my final bill will be a credit (xtra 1 week) + there stuff up.

NZ needs way more competition just like Air NZ, then consumers will see what rubbish we;ve had to put up with due to there respective monopolies

[Snoopy]

SNOOPY, The internet is the best way to get reports i find. Look at the money they save by doing it this way. Print it out if you want to go over it in detail. Macdunk


Macca, I agree that not sending out a paper report will save Telecom money, even if the total amount saved amounts to less than one day's salary of their new CEO. The problem I have is that the 'default option' is that shareholders will not get an annual report, which they still have the option to specifically request, until after the AGM. You and I can look this stuff up on the net. But what about those shareholders who do not have ready access to the internet? It is a bit tough on them, don't you think?

SNOOPY

[Deev8]

I am casting my vote on new CEO Dr Reynolds pay packet today, via the AGM voting form.The information on Paul Reynolds' remuneration package in Telecom's SEC filing makes interesting reading. In fact the whole document provides far more detail than Telecom provide directly to shareholders.

The latest SEC filing is available on Telecom's website (if you look hard enough) 20F 13 September 2007 (PDF 1.13MB) (http://www.telecom.co.nz/binarys/20f2007.pdf). The section on New Chief Executive Officer Remuneration starts on page 133.

[Deev8]

The information on Paul Reynolds' remuneration package in Telecom's SEC filing makes interesting reading. In fact the whole document provides far more detail than Telecom provide directly to shareholders.

The latest SEC filing is available on Telecom's website (if you look hard enough) 20F 13 September 2007 (PDF 1.13MB) (http://www.telecom.co.nz/binarys/20f2007.pdf). The section on New Chief Executive Officer Remuneration starts on page 133.Paul Reynolds employment offer letter and contract of employment are included in the pdf file starting at page 267.

[beacon]

Better than expected announcement. sale of network is great positive, but what is the price?

[foodee]

Better than expected announcement. sale of network is great positive, but what is the price?

There is a valuation of between 3.5b - 4.7b

[beacon]

That Citigroup valuation is on the conservative side foodee. Network sale will see much needed investment flows in that side of the business, as long as the Govt. does not meddle with it further. It is encouraging to finally see some pragmatism and empathy in the latest Cunliffe announcement. The man is learning. Meanwhile Australian funds have been steadily accumulating the stock lately, and come October Kiwi Saver funds and Tel Cap retn funds will start to flow back in. Paul's experience is also likely to be value for money. Do I sense a turning tide? ...

[tycoon_1]

Got a question, I thought after the capital return the share price of telecom will increase automatically to adjust for the reduction of shares? or am i mistaken?

[macduffy]

Got a question, I thought after the capital return the share price of telecom will increase automatically to adjust for the reduction of shares? or am i mistaken?

You must also take into account the reduction in the co's cash to pay for the re-purchased shares. Anyone's guess as to whether the market has got this right, but the "adjustment" has been made well before now.

[craic]

In reality, the price should not change. Think of a $100 company with 100 ordinary shares. If the company buys back 10 shares at $1 then you are left with a $90 company with 90 shares - nothing has changed as the reduced amount of "interest" that can be earned from he reduced capital is divided between a reduced number of shareholders. I decided a while ago that TEL was a good prospect an increased my lot to between $60,000 and $7,000. The lessening of its image as a monopoly will increase confidence, particularly since the socialist hammer has been weilded in a rather more gentle manner then many might have feared. I have a cheque for $8,500 in the mail and the share is in the black and rising on my portfolio. I expect my good fortune to continue.

[777]

Tycoon the price did adjust on the first day of trading after ex date.

((9 times the last price)-4.88)/8 = new theoretical price.

Same formula for any bonus or cash issue. This was a minus cash issue in effect.

I can't remember what the price was at the close of market on the ex date.

However I think it ended up about 6c above theoretical price at opening on the first day at about 4.28.

[tycoon_1]

okay thanks... I thought the price will increase significantly due to reduction in number of shares on issue - so what you own now is actually less than what you had before the capital return (which I thought was in effect bonus cash dividend).

[mccollr]

From the NBR today

The faster the better
The government’s new role as macro-manager of a devolved Telecom is likely to be watched around the world as yet another crack at improving competition and investment in the difficult area of network economics.
That Telecom has changed its mind toward a three way split based on operations indicates it has, under new CEO Paul Reynolds, adopted a radical new strategy.
The flipside of this is an expectation lower regulation. This is why Telecom will retain ownership of the basic fixed line network, contrary to some suggestions, as a key part of rebuilding shareholder value after the heavy loss of the past year.
The capital-hungry network might be more than a loss-leader if Telecom still has the major role of running the network at arms-length to its wholesaling and retailing arms.

[Lawso]

A week or so ago I held, let's say, 10,000 TEL shares, worth around 440cps, post the 14.5c divvy. The company buys back 1 in 9, i.e. 1111 shares @ 488cps, yielding $5426.56.

To restore my holding to 10,000, I buy 1111 shares on market, current price 457. Cost: $5077 + 29.90 bkge = $5107.

Therefore
1. I got the divvy in early September - $1450 net
2. I get the buyback money of $5426 at the end of this week.
3. I spend $5107, leaving me $1769 ahead.
4. And my holding is now worth $45,700, previously circa $44,000.

Beats working.

[foodee]

Lawso

You're onto it.:)

[beacon]

Any first hand impressions about Paul from anyone who attended the Dunedin briefing?

[Deev8]

An interesting Herald report on the Telecom shareholders meeting says that Shareholders question Reynolds' pay package (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10467974).

Paul Reynolds sat calmly as shareholders questioned the value of his remuneration package. However his remuneration package was approved by a significant margin.

Details of resolutions and voting - Annual Meeting Resolutions (http://www.nzx.com/market/market_announcements/by_company?id=154839)

[Deev8]

Results for three months ended 30 September 2007 released this morning.


Total operating revenue: $1.4Bn; Up 0.1%
Operating surplus before tax: $280M; Up 1.1%
Operating surplus from continuing operations: $225M; Up 16.0%
Earnings per share: 11 cps, same as last year
First Quarter Dividend: 7.0 cps, same as last year (Payable 7th December)


Results announcement: NZX - SUMMARY OF PRELIMINARY THREE MONTHS ANNOUNCEMENT (http://www.nzx.com/market/market_announcements/by_company?id=156112)

[Snoopy]

Results for three months ended 30 September 2007 released this morning.


Total operating revenue: $1.4Bn; Up 0.1%
Operating surplus before tax: $280M; Up 1.1%
Operating surplus from continuing operations: $225M; Up 16.0%
Earnings per share: 11 cps, same as last year
First Quarter Dividend: 7.0 cps, same as last year (Payable 7th December)




I am a bit surprised about the muted reaction to Telecom's first quarter result today. There has been a deterioration in the NZ business, as expected. But the new financial strength of the company (meaning a lower interest bill), combined with lower corporate tax rates and the (slightly) improving picture in Australia has offset this. That shows to me that management have continued to demonstrate they are up to the challenges that Telecom is facing.

The decline in projected profit from 'ongoing services projected profit' from $856m in FY2007 to $700-$730m for FY2008 doesn't make pretty reading. But you have to remember that one in nine shares were cancelled in the recent restructuring. Thus if Telecom can reach the upper end of their profit guidance, earnings per share will be virtually flat compared to last year. $730m on 1,770m shares gives earnings per share of over 40cps. A dividend this year of 30cps would be consistent with the policy of paying out 75% of earnings. Based on a share price of $4.17, we are looking at a projected PE of 10 and a gross dividend yield of 10.7%. A price of $4.05 will IMO be the next lower support level, equating to a gross yield of 11%

Ultimately the value of Telecom will depend on what happens from FY2009 onwards. Telecom are IMO being deliberately bearish in their forecasting, -the right thing to do in today's political climate. But profits on an earnings per share basis are still at or near record levels this century. The real uncertainties going forward IMO are fully reflected in the share price band where Telecom trades now. New CEO Reynolds looks like he is playing the canny game of underpromising and overdelivering. You would have to be a very big gambler to not have TEL in your investment portfolio I think.

SNOOPY

discl: hold TEL

[duncan macgregor]

SNOOPY during the reign of the last CEO the share price more than halved as she extracted millions in salary, and perks. She was bright enough to give out good dividends along the way to keep the mug punters happy. The new CEO is on a higher salary with perks, the mug punters are still happy with the dividends. The share price is still likely to downtrend nothing has changed. Macdunk

[duncan macgregor]

HIAWATHA, Jan 2006 the sp was $6-00. Jan 2007 the sp was $4-80. Today the SP is $4-17. Tell me what you think a downtrend looks like?. The question to ask yourself is TEL in a better position today than it was in Jan 2006 when you lost 30% of your share price. Naturally SNOOPY will bleat on about dividends etc but during that time its been a bull market. The position i take buying into a share is will the sp rise faster than its competitors for my investment dollar. Dividends are only a bonus. Read back all the old posts at how wrong some people can be who still argue about how good the fundamentals are. Macdunk

[duncan macgregor]

The Jan 2006 price is irrelevant since there was a break in the trend about the middle of last year when michael ryan blew the whistle on the government's LLU plans. I think you should do some homework on the subject of trend analysis.
hiawatha HIAWATHA, You are welcome to do any analysis you like, the long term trend is down. Who cares what they do, if this is a buy in your book then buy. I am to busy doing homework on Aussie miners. I have always stated the TEL sp would trend down all the way from $7-00. Look it up in all the old posts, then tell me again how silly i was to miss an opportunity like telecom. The NZ currency has dropped over 7% so far this year against the AUD so work that into your price. Incidently two of my four investments are up over 140% since Jan MCR, SMY, plus the exchange gain. You should stop playing with dogs and get with it. Macdunk

[duncan macgregor]

Just because the trend changed direction between sept to jan simply dousnt meen that the long term trend has changed, or dont you know that?. The sp was over $9-00 its now $4-17 and you argue about six months. A young Indian like yourself should get away from the cowboy exchange i can see you getting into a lot of trouble. Get over to the ASX the AUD is still going up against the NZ dollar you would make more on that alone than holding TEL. Macdunk

[duncan macgregor]

LOL, shouldn't be amazed Hia...Maca is a simple fellow

Maca, since you have been bleating on all year about these 2 amazing stocks you picked...interested in what all your analysis on the ASX has turned up more recently.
ie, how long before your 100%ers start turning in lower averages as you hold into the future.

only one I can recall recently is MRX? not that flash.Quite right SECTORSURFA MRX dropped back nearly 6% on friday Bought on 16th of july at 13.5c now 16c down from 17c only a lousey 18% gain in three and a half months. If you have anything up top you would get on to it copper is trending up. Bring it back at me in six months time lets compare it with what TEL will do in that period. Macdunk

[Scuffer]

Exactly right Dunk COPPER will sky rocket as we switch away from fossil fuel and move towards electricity.Alternators electric motors need lots of copper imagine it it will be like all my Xmases.

[bermuda]

oh? 13.5c

I thought you told me you were in at 15.5c but bailed at a loss, back in again

including that loss in your 18% gain?:D


Me, doing excellent with MPJ and PSA. MEP looking good from low 60s up to 80c ish

PSA has been great buying 130-140s, touching 190s recently in your same time period...MPJ rocketing up 70% recently (big holding in AGO).

DRX about even with distribution of spin off...so dissappointing but 23c is great buying as of now

My BIG tip for the next year is GLE, now a solid buy in mid 40s. Was a bargain at 36c ntly (last week). Thats my see me in 6-12 months maca

TEL, dont invest on NZX much Maca so we have something in common. Wouldnt bother with something as boring as TEL.

Have to agree. Money in TEL is Dead money.

[Snoopy]

The question to ask yourself is TEL in a better position today than it was in Jan 2006 when you lost 30% of your share price. Macdunk


I love these one liners because they are so easy to prove irrelevant. The above is written by someone who does not understand the difference between price and value. Clearly the value of TEL changed when unbundling was announced. As a result the market price fell from around $5.50 to around $4. Theresa Gattung said that unbundling had reduced the value of TEL by some 30c per share. TG was talking about long term value whereas the market gave us instant value largely driven by fear. So who to believe?

Perhaps a better question to ask first was, who do you have to believe? I didn't have to sell any TEL shares so I didn't have to believe either of Mr Market or Theresa. Given Mr Market is prone to gross overreactions and Theresa was probably putting the best spin on things I would tend to believe neither. And given I didn't have to cash up, I was quite content to sit with the 'do nothing' option.

Taking a 'mid view' the true loss of value lies somewhere between 30cps and $1.50 per share. Perversely the share price of Telecom sits at $4.16 as I write this. If you add back the 61cps of capital just returned to shareholders we get $4.77 - almost *exactly* the mid point of what Theresa thought and the bottom where the market originally overreacted to!

To get back to the point, there is no point in asking a rhetorical question as to whether Telecom's position is worse now than it was eighteen months ago. Of course the answer is yes. The question you need to ask is, is the position of Telecom more than 12.5% worse, (which is where the share price has been discounted to). I would say it might be, which is why I am not out there rushing to scoop up more Telecom shares at today's prices. I am watching out very carefully for any significant market weakness though. If that happens I will have no hesitation in buying more.


Have to agree. Money in TEL is Dead money.

That above statement is completely untrue as Telecom is on a projected revenue yield of 10.7% per year. That is quite a significant premium on 'money in the bank' and is the main reason every investor's portfolio should hold Telecom IMO. When I last bought Telecom only two to three months ago the projected yield was much higher than that (due to the impending capital return) and I was rewarded handsomely (earning over 20% per year on an annualised basis) in just a few weeks.


Wouldnt bother with something as boring as TEL.

Strangely enough I first started to ramp up my investment in Telecom at the turn of the century in the midst of the dot-com boom, one of the most 'interesting' periods in telecommunications history. I didn't invest in any dot-com stocks myself, as I couldn't see the long term value in them. It made perfect sense to me though to 'own the road' and get my share of the tolls as all that dot-com traffic whizzed about. Thus I saw Telecom as a kind of low risk dot com. In relative terms it proved low risk as I didn't lose 80% of my capital. But I put my Telecom investment in the bottom drawer, while I re-evaluated my investment strategy.

After reading in detail about Warren Buffett, I decided to gradually transition my investment portfolio to a more 'value investment' style. Rather than focussing on the interesting and hot, value investment taught me instead to look for the boring and overlooked. Telecom, now in a sector that those burned by the tech wreck wanted out of, quickly came out of my bottom drawer. What was at that stage my smallest NZX investment soon became my largest. That government unbundling announcement was a blow. But I was protected in the sense I had not bought into TEL at highly inflated prices. And instead of panicing and selling out, I was quite aggressive in buying Telecom shares in the low four dollar range, and again at $4.50 or so just prior to the big capital payout. As a result my return on Telecom over that period was around 20% per annum which over 18 months more than wiped out the previous unbundling loss I had made.

Thus in my experience boring is good. But of course a key ingredient of making boring a winning strategy is to ensure that most people remain so uninterested they never study the prospects of the likes of TEL and so miss out on the easy money. Long may you preach Sectorsurfa!


AUD is still going up against the NZ dollar you would make more on that alone than holding TEL. Macdunk

Not true. 18 months ago the $NZ was buying around 92 Australian cents. Now it buys around 82 Australian cents which is an 11% gain on your money. OTOH the gain to Telecom shareholders was around 25% over the same time frame. So holders in Telecom have done twice as well as the Ozzie NZ currency speculators.

SNOOPY

[duncan macgregor]

SNOOPY, When will you ever learn that 18 months ago if you had invested in AUSSIE you would have an 11% start. They are all yours SNOOPY the company needs you, plenty of chances to average down coming up. Macdunk

[Snoopy]

SNOOPY, When will you ever learn that 18 months ago if you had invested in AUSSIE you would have an 11% start. They are all yours SNOOPY the company needs you, plenty of chances to average down coming up. Macdunk

Macdunk, I have been investing in Aussie for years (albeit not very actively). That includes the time period when you were just starting out, and you would only consider the NZX for investment yourself. In fact you regarded anyone who didn't put all their money in the NZX as a traitor IIRC. How times have changed.

I invest in Australia to get access to company sectors not available on the NZX (mainly banks and minerals). Not to gamble on exchange rates, which is a zero sum game in the end and IMO something best left to professional currency traders. This isn't a thread on the merits of what markets (NZX vs ASX) to invest in. There is another thread specifically devoted to that, where I notice you have been active.

This is a thread on Telecom and what will happen over the time of reorganization. You have made your news well known on the subject - mostly rhetoric based on well, nothing really except for yesterday's falling share price. If you have nothing more to add then you don't need to add any more.

To bring the this thread back on topic, the falling exchange rate is bad news for Telecom because they are making losses in Australia. Last year the loss was $A26m which was only good in the sense that the loss the previous year was $A76m. The more the exchange rate declines the greater those '$A losses' are in $NZ. However, if Telecom can stop the bleeding in Australia then the decline in exchange rate might be good for them.

SNOOPY

[Dr_Who]

I understand that the overseas institutions use TEL as a currency play. They tend to buy TEL on the upward $NZ trend and sell TEL on a downward $NZ. Is this correct?

[whatsup]

Yes, they do it all the time.

[duncan macgregor]

SECTOR SURFA, Its not the right thread to discuss my trading. MRX is a great trading share with highs and lows and a general uptrend to keep it safe. Sometimes you win sometimes you lose. I bought yesterday at 13.5c will sell at 15c or more or get out at 12.5c. There you have it thats what i do all the time keep an eye on that trade. I have had 6 good trades and two losing trades. MRX in april 9c, in may11c. june 10c. july 18c, aug 10c, oct 13.5c and 16.5c nov 13.5c. I think even you might have made a profit trading that with a 5% following stop loss. Dont try it on TEL it is on a downtrend with not enough fluctuation in the sp. Macdunk

[STRAT]

Arent you hanging around in the wrong part of the forum Duncan? or did you just pop in to don the gloves for a few rounds with Snoopy :D:D:D

[Snoopy]

Comm Sec Aegis research puts SELL rating on TEL.

Why though SectorSurfa?

I will put your negative rating on Telecom up against the JP Morgan positive rating, and the reason they are positive on Telecom.

"On November 22nd JP Morgan rates TEL as Overweight - Telecom NZ has unveiled its plans to roll out FTTN in the next 3-4 years. In short, this stifles the competition
because smaller ISPs will thus no longer have access to ULL and sub-loop
unbundling is just not economic."

"A positive for Tel NZ, the broker says. Target NZ$4.64."

Still it isn't a surprise that Telecom is such a misunderstood company when the reporting on it is so bad. This from the early opening market news summary today:

"The sharemarket was up in early trade today, despite a fall in top stock Telecom."

"Shortly after the market's 10am opening, the benchmark NZSX-50 index was up 8.89 points to 4079.89, following a 16.8 point rise on Friday."

"But, despite the New Zealand market's early rise today, top stock Telecom was down 2c to $4.25, following a 7c rise on Friday."

It sounds bad doesn't it? But what this news report fails to mention is that Telecom went ex a 7c dividend on Friday. So a price of $4.25 represents a *rise* of 5cps over the weekend. Thus the true performance of Telecom 'over the weekend' has seen a boost in shareholder wealth - the exact opposite effect to the impression given in the article!

Furthermore the writer of the article seems oblivious to the fact that the NZSX50 is a gross index, which means it includes dividends. Telecom was the most significant weighted NZX50 dividend payer, as far as the index is concerned to go ex-dividend on Friday. The rise in the NZX50 'over the wekend' was 0.2%. The rise in the worth of Telecom shareholders with the shares going ex-dividend was 1.6% - far greater than the NZX50 rise. So far from dragging the index down, Telecom going ex-dividend is actually strongly pulling the index up. This, again, is the exact opposite effect to the article where it was claimed Telecom is a drag on the index!

It is very worrying when the financial press can get something as simple as this so terribly wrong.

SNOOPY

discl: hold TEL

[duncan macgregor]

keepin an eye on ya maca - MRX 10.5c

lost again I see, buy again?

oh how times are a changin I notice you dont mention AGM. I wont respond to any more of your little digs SECTOR SURFER. The last time i responded to you was when you had your little dig at GERRY who has just passed away which must make you the lowest form of life on the planet. Look it up guys its on the 2007 ASX share competition thread. To ridicule a man of GERRIES stature shows what a low person you have become. Macdunk

[macduffy]

Am I missing something relevant to TEL in this season of goodwill?

[Ttops]

Am I missing something relevant to TEL in this season of goodwill?

Perhaps one of them will start a new thread just devoted to ridiculing each other. Then we can won't have to tolerate their superegos on every thread. :)
When the need requires they can do a "Mallard" and end cuSS or cuMD which means the SS :mad: MD thread


Call it. "The SS :mad: MD mutual appreciation" thread.

Merry Xmas guys. :D

[Steve]

Has TEL finally seen the light? Interview with Paul Reynolds.

Ringing in the changes at Telecom (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10485412&pnum=2)
"I think Telecom needs to win its customers and win the right to serve those customers - and choice shatters the whole market," says Reynolds.

"I think it will create a more mature market - customers feel they have choice and are more relaxed therefore about the position of communications in the marketplace - that is very important.

"It might seem paradoxical, but I believe that Telecom will flourish - and become a stronger and better organisation as a result of that choice."
...
He cites oil as an industry where sometimes partners are also rivals. One company might build a refinery, for example, which then supplies all the petrol stations in a region - including those competing with its retail arm.

"The telecommunications industry is going that way and I want to accelerate the speed we mature in that way," he says.

Could you imagine TG saying all this? ;)

[kura]

Has TEL finally seen the light? Interview with Paul Reynolds.


Could you imagine TG saying all this? ;)

Nope, can't imagine it at all !

To put TG in perspective, the reason she had to go, was that her confrontational style simply failed.

As an aside, it is a lesson that TLS has yet to learn !

[Bilo]

I love these one liners because they are so easy to prove irrelevant. The above is written by someone who does not understand the difference between price and value. Clearly the value of TEL changed when unbundling was announced. As a result the market price fell from around $5.50 to around $4. Theresa Gattung said that unbundling had reduced the value of TEL by some 30c per share. TG was talking about long term value whereas the market gave us instant value largely driven by fear. So who to believe?

Perhaps a better question to ask first was, who do you have to believe? I didn't have to sell any TEL shares so I didn't have to believe either of Mr Market or Theresa. Given Mr Market is prone to gross overreactions and Theresa was probably putting the best spin on things I would tend to believe neither. And given I didn't have to cash up, I was quite content to sit with the 'do nothing' option.

Taking a 'mid view' the true loss of value lies somewhere between 30cps and $1.50 per share. Perversely the share price of Telecom sits at $4.16 as I write this. If you add back the 61cps of capital just returned to shareholders we get $4.77 - almost *exactly* the mid point of what Theresa thought and the bottom where the market originally overreacted to!

To get back to the point, there is no point in asking a rhetorical question as to whether Telecom's position is worse now than it was eighteen months ago. Of course the answer is yes. The question you need to ask is, is the position of Telecom more than 12.5% worse, (which is where the share price has been discounted to). I would say it might be, which is why I am not out there rushing to scoop up more Telecom shares at today's prices. I am watching out very carefully for any significant market weakness though. If that happens I will have no hesitation in buying more.



That above statement is completely untrue as Telecom is on a projected revenue yield of 10.7% per year. That is quite a significant premium on 'money in the bank' and is the main reason every investor's portfolio should hold Telecom IMO. When I last bought Telecom only two to three months ago the projected yield was much higher than that (due to the impending capital return) and I was rewarded handsomely (earning over 20% per year on an annualised basis) in just a few weeks.



Strangely enough I first started to ramp up my investment in Telecom at the turn of the century in the midst of the dot-com boom, one of the most 'interesting' periods in telecommunications history. I didn't invest in any dot-com stocks myself, as I couldn't see the long term value in them. It made perfect sense to me though to 'own the road' and get my share of the tolls as all that dot-com traffic whizzed about. Thus I saw Telecom as a kind of low risk dot com. In relative terms it proved low risk as I didn't lose 80% of my capital. But I put my Telecom investment in the bottom drawer, while I re-evaluated my investment strategy.

After reading in detail about Warren Buffett, I decided to gradually transition my investment portfolio to a more 'value investment' style. Rather than focussing on the interesting and hot, value investment taught me instead to look for the boring and overlooked. Telecom, now in a sector that those burned by the tech wreck wanted out of, quickly came out of my bottom drawer. What was at that stage my smallest NZX investment soon became my largest. That government unbundling announcement was a blow. But I was protected in the sense I had not bought into TEL at highly inflated prices. And instead of panicing and selling out, I was quite aggressive in buying Telecom shares in the low four dollar range, and again at $4.50 or so just prior to the big capital payout. As a result my return on Telecom over that period was around 20% per annum which over 18 months more than wiped out the previous unbundling loss I had made.

Thus in my experience boring is good. But of course a key ingredient of making boring a winning strategy is to ensure that most people remain so uninterested they never study the prospects of the likes of TEL and so miss out on the easy money. Long may you preach Sectorsurfa!



Not true. 18 months ago the $NZ was buying around 92 Australian cents. Now it buys around 82 Australian cents which is an 11% gain on your money. OTOH the gain to Telecom shareholders was around 25% over the same time frame. So holders in Telecom have done twice as well as the Ozzie NZ currency speculators.

SNOOPY


Snoopy, Have you got time to give us an update?
PS I didn't expect to see sub $4 again.

[Major von Tempsky]

Well they ain't yet (sub $4.00).
Where else can you get 12.65% gross yield (at $4.12) on a sustainable basis?
There's a lot of irrational panic stricken people around stuffing banknotes under their mattress and buying gold but I'd much rather have the sustainable yield.
And it beats all those shifty finance companies anyway :-)
If the yield on Fletcher Bldg got up to say 10% I'd use some cash to buy them too.

[duncan macgregor]

Well they ain't yet (sub $4.00).
Where else can you get 12.65% gross yield (at $4.12) on a sustainable basis?
There's a lot of irrational panic stricken people around stuffing banknotes under their mattress and buying gold but I'd much rather have the sustainable yield.
And it beats all those shifty finance companies anyway :-)
If the yield on Fletcher Bldg got up to say 10% I'd use some cash to buy them too. MVT, You still have learned nothing it seems about the market being irrational. You measure the irrational market in a rational way, then blame the market for the out come. Three years ago the shares traded at $6-40 today down to $4-06 on the way down yet you talk about dividends. If you go further back the shares were $9-00 which brings your rationality or methods into question. It is not rational to hold downtrending shares long term in bull markets. We are now in a bear market heading for a crash, surely if you were a rational person with any kind of system worth having you would have your funds safely in the bank getting a lousey 5% watching mugs buying more averaging down.
We all make mistakes i ignored a couple of sell signals thinking i know best at my cost, but lesson well learned. Your fundamental analysis is as usefull as tits on a bull in a market crash as you are finding out, the market is controlled by sentiment. I bet PHAEDRUS is sitting it out earning a lousey 5% interest in the bank laughing at you lot waiting to come back for the road kill. Macdunk

[kura]

I've been pretty anti TEL in my sentiment in the past, however I've bought some today !

[Deev8]

You still have learned nothing it seems about the market being irrational ... Three years ago the shares traded at $6-40 today down to $4-06 ... If you go further back the shares were $9-00 MacdunkMacdunk doesn't seem to understand that someone who buys a share today for $4-06 doesn't care what it would have cost three years ago or sometime even further back in history. They have made a decision based on the price that the shares are selling for now.

[duncan macgregor]

DEEV8, I do understand that its all about tomorrow yesterday is dead and gone, unless you were holding yesterday, then the past comes back to haunt you. TEL prospects have been declining each year hence the prolonged downtrend. At what stage is it a bargain?, thats all that matters. The market is in steep decline the NZ dollar is to high, TEL is the big fat duck sitting in the pond. This company is in a worse position looking forward than it has ever been fundamentely, its prospects have worsened as the years go by. Big crash looming its time to sit out and reflect, not average down as some people with no sell system are inclined to do. Macdunk

[Billy Boy]

I've Gotta agree with Mcdunk. The big fat duck thing.
Dont 4get the govt has been sticking their fingers in and when that
happens.... S**t happens.
2008 is gonna be rocky, and the bears have come out to play around
the world. I feel sorry for the Kiwisaver's, There's gonna be some p*ssed off Plebs.
BB

[Deev8]

This company is in a worse position looking forward than it has ever been fundamentely ... MacdunkThat's the part that I am not so certain about.

Under Gattung's leadership Telecom may have been locked into a battle with the Govenment that they were bound to lose, but Reynolds' strategy has a far greater chance of success. Of course he is one of the very few people (in Government or a major NZ Telco) to have played the LLU and operational separation game before. And during his time with BT Group he saw that a dominant telco can play that game and win - meaning they can actually thrive, not just survive. Of course lots of details are very different in the Kiwi version of this game, starting with the scale of operations, but overall the game is very similar.

I'm not about to become a cheerleader for Telecom, but I wouldn't bet against the company being in a better position in two or three years time than they were when LLU was announced.

[Billy Boy]

Under $4 ...Yep I recon
I got out last March, small profit.
You've gotta read old Dunk very carfully, it twas him that lifted the
red flat in somthing he said, cant find it now.

[Billy Boy]

Deev8 I go along with what you are saying
But is now the time to buy or the wait and see approach be better.
BB

[Kropotkin]

Wait and see for sure.

Some good , some bad.

pro's:

1. TNZ is well on the way to meeting separation undertakings
2. Cabinetisation
3. Incumbency

con's:

1. Heavy US ownership
2. Exposure to NYSE
3. Potential future State meddling

I think the sp will continue to take hits, but definitely more based on current market and perenial telecom beat-up rather than fundamentals.

[Deev8]

Deev8 I go along with what you are saying
But is now the time to buy or the wait and see approach be better.
BBI don't know, and of course none of us will know until it's too late.

There is one consolation buying Telecom "too soon" (although Macdunk may sneer at the thought) - their dividend payments make the wait more bearable.

[Billy Boy]

Deev8
Yea, But
We are in a big bear market.
How about this for a thought.
Say too share holders :-
No div's for a while, we will do a buy back (maybe), Consolidate, lower dept, Get the bloody govt off our back (coz thats whats stuffing them),
And take it from there, when and as fitting in a good comercial way.
It wont be fast but it could be systematic, coz they have the
basis and cliential.
If they continue to F**k about the way they are, then they will remain
a "also ran". In short :- Stop pocket pissing and realize who and what they are, or could be again. Ditch the yanks etc, why worry about them.
Let them worry about telecom, A slow and systematic return. But above all, get the bloody govt out of their hair.

BB

[duncan macgregor]

I think with TEL you have a great percentage of shareholders from overseas investing for exchange rate reasons. The NZ dollar is to high for what its worth, very inclined if anything to go down to a lower level. I think that TEL shares will drop simply because of that factor. If the dollar drops TEL shares drop with the reverse being the case otherwise. New competition as never before, the fundamentals are not good with a dropping sp and dividends failing to keep up with the market average of sp plus dividends. macdunk

[kura]

Gee, the consensus of opinion is that the NZD is going to drop against the USD, anyone ever considered that it is the USD that is the one in danger of dropping.

Of course the imminent reduction in US interest rates could allways have the effect of attracting more investors into the USD ?

Only once the US get their financial act together, (ie by living within their means) can we really expect to drop against the USD (my only provisio to this being another war, maybe one with Iran would probably do it !)

[Snoopy]

Snoopy, Have you got time to give us an update?
PS I didn't expect to see sub $4 again.

Telecom up a cent today to $4.14 while the rest of the market continues to head south!
What was all the talk of sub $4 Bilo?

The market is down around 10% since the record 'slump' began 12 trading days ago. But Telecom is only down 5%. Not great but hardly worth 'getting out' for with yet another dividend coming up. The low PE ratio that Telecom trades on means that in a bear market it will fall less than other shares, if it falls at all. You really need to stay in this one as the long term effect of any 'sub prime' ripple will be nil on Telecom.

Operationally Telecom haven't really felt the effects of unbundling yet, which is why underlying profits are at record highs. Five exchanges have been unbundled in Auckland (with others to follow) and now Orcon are 'getting into them', so we shall see what happens. Operational profits will be lower this year at Telecom. But remember one in nine shares was cancelled late last year, so it is not a given that earnings per share will be less in FY2008.

Operationally the only negative I can come up with is that a few months ago I shot a question off to shareholder services which to this day remains unanswered. Usually they are really quick at replying! I was asking for some more information on their 'divisional analysis', and exactly what fits in what division now. Perhaps in the midst of this restructure they genuinely couldn't answer me, although it would have been nice if they had emailed me back and admitted it, if that indeed was the case. It certainly makes it difficult to analyse the company if they keep mixing and rematching the different operational functions within it. Of course it makes it harder for the competition to understand what they are up to as well, which is perhaps the point?

No recent news from Telecom means I can't update my views on the company any better than I have articulated already. I reckon it is still good value overall, although I may have to wait for a few months - while the new divisional structures bed in - to explain in any more detail why.

SNOOPY

discl: hold TEL

[Bilo]

Telecom up a cent today to $4.14 while the rest of the market continues to head south!
What was all the talk of sub $4 Bilo?

SNOOPY

discl: hold TEL

thanks Snoopy
I always appreciate your thoughts.

My sub $4 was simply to draw attention to the stupidity that is allowed to enter the market when major participants just withdraw from buying. I think at the time TEL was being offered at $4.04. I don't think the big funds do anyone a good turn when they only seem to cross volumes during the opening, closing, and out of trading hours, times.

[duncan macgregor]

Must say that I agree with Duncan on this-absolute waste of time trying to analyse what a monster like TEL is up to.Simple-its on a downtrend so keep out.Making money on the share market is not that hard. One of the more realistic posts in the past. TEL was on a downtrend during a prolonged bull market. Now that the market is turning into a bear market the smart thing to do is copy what bears do.
Bears hybernate during the winter, they stop running about playing in the field they go to sleep when the winter strikes. Tel will continue its prolonged downtrend with plenty of opportunities to average down bleating about dividends in this bear market. Macdunk

[Lawso]

TEL now down to 408cps. Ridiculously low p/e. High div yield. CEO saying and doing all the right things. A great buy at these levels IMO.

[777]

That can be easily fixed Lawso.

Reduce the dividend to achieve the desired yield.

[Steve]

Today's announcement is that TEL is allowing SPY to manage the wireless hotspots.

Question for the techno buffs - How do you make $$$ out of a wireless hotspot? I thought that they allowed anyone with a wireless modem to access the network, such as at airports etc...

[toffeefan]

Advertising I would imagine. Have an initial 'home page' and sell space on this.

There was a guy on Dragon's Den UK a few years back who did the same for hotspots in harbours and marinas. They like it and funded him. He was going to sell advertising space when they 'hit' the initial home page.

[Steve]

Why can't a company like TEL get it right?

Telecom to face court over broadband claims (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10490054)
Telecom and its subsidiary Xtra are to be prosecuted for allegedly misleading the public with its Go Large broadband promotion.

In 2006 Telecom and Xtra launched nationwide advertising of its new broadband plan "Go Large", in which it made a number of representations, including "Xtra Broadband is about to be unleashed!", "unlimited data usage and all the internet you can handle" and "maximum speed internet".

The Commerce Commission launched an investigation following complaints from Xtra customers.

It has now decided to prosecute Telecom, alleging it breached the Fair Trading Act by misleading the public about the services and making false or misleading representations about the performance of the Go Large plan.

Companies found guilty of breaching the Act may be fined up to $200,000.

[Deev8]

Telecom and its subsidiary Xtra are to be prosecuted for allegedly misleading the public with its Go Large broadband promotion.

Why can't a company like TEL get it right?Actually I think that they can get it right, but the payoff for not trying too hard can be significant, and if the Commerce Commission take action the resulting slap over the wrist is a minor inconvenience.

This isn't a criticism that I'm aiming at Telecom in particular, most large companies do similar things here in NZ. For that situation to change we need a regulator given greater powers and a willingness to act.

[Major von Tempsky]

Why even waste time discussing this Go Large advertising thingy? The advertising bods should hedge their language slightly and there would be no problem. You would have had to be simple minded to take the language literally anyway.
As the report said the maximum fine is $200,000 and you can be sure that won't be imposed and it will probably be appealed and the legal costs for both parties will be higher than the fine.

Of far more interest should be TEL's next quarterly report which presumably will be today....at what time?

[Major von Tempsky]

Ok, its Friday 8 Feb (next Friday) with a webcast at 10p.m.
Do a search on Google (clicking NZ pages) with "Telecom results".

See y'all later Friday morning.

[duncan macgregor]

TEL is going to post a 25% drop in quarterly earnings according to Stuff. Looks like a great chance coming up for the brain dead to average down. Macdunk

[Lawso]

Ok, its Friday 8 Feb (next Friday) with a webcast at 10p.m.
p.m., Major?

[Major von Tempsky]

Sorry Lawso, good point. My fingers type too fast :-)

Dear old economic backwoodsman Dunk....of course the fact that the Yellow Pages have been sold off wouldn't have anything to do with it Dunk would it...and you need to compare the normalised net profit with the capital employed.....
Really I prefer to wait for the actual figures and some expert opinion rather than joining in some ignorant artificial hysteria....you've only 4 days of rhubarb before the actual data deflates you Dunk, enjoy your 4 days....
Once one has been through all the adjustments and analysis...a gross 25% decline (if it were true) might well prove to be a good result....

Dunk puts me in mind of some years ago when I was mooting selling off my Motor Holdings shares which I thought had peaked. No, said an old friend who somehow reminds me of McDunk, I've just seen an article in Truth by Headley Mortlock how Motor Holdings have some way to run, a good hold. So I held and they crashed. So much for scuttlebutt in the yellow press.

[duncan macgregor]

TEL is going to post a 25% drop in quarterly earnings according to Stuff. Looks like a great chance coming up for the brain dead to average down. Macdunk Down 10c this morning to $4-00 so far. The market clearly thinks it stinks. Its gone long term from $9-00 to $4-00 paying handsome dividends all the way down to keep the gullible happy. The question remains how low will it go when the NZ dollar plummets one day as it surely must. Macdunk

[Major von Tempsky]

MacDunk, the economic backwoodsman who can't understand free trade and refuses to study any economics talking about gullibility? Ha! ha! ha! Ho! ho! ho!
How many people who purchased TEL at $9.00 are still holding them? Probably nobody.
If u had listened to the presentation u would have heard Paul say that normalised net profit adjusted for Yellow Pages has decreased very slightly.
7cps fully imputed divvy, I'm still laughing.
Only idiots who take MacDunk's idiotic advice and sell take a capital loss. In the long run the share price must rise until the current gross dividend yield of 12.75% becomes a more normal level of return. That's the basis that Buffett makes long term value investment decisions on and why MacDunk will never be a multi-millionaire but looking for dollar coins in the gutter as he walks along the road.

[duncan macgregor]

MVT, TEL wont qualify as a BUFFET buy so why bring him into it. Why dont you tell the boys and girls how clever you were with your TEL shares by averaging down from what level again?. Carefull major we can look it up in the old threads. Your old PAL MACDUNK.

[duncan macgregor]

Sorry Lawso, good point. My fingers type too fast :-)

Dear old economic backwoodsman Dunk....of course the fact that the Yellow Pages have been sold off wouldn't have anything to do with it Dunk would it...and you need to compare the normalised net profit with the capital employed.....
Really I prefer to wait for the actual figures and some expert opinion rather than joining in some ignorant artificial hysteria....you've only 4 days of rhubarb before the actual data deflates you Dunk, enjoy your 4 days....
. HEY MVT can you give us your expert opinion on why TEL dropped 19c so far today. When do you think TEL will descend to $3-00 a share?. Perhaps PHAEDRUS would be kind enough to give us a chart of the long term downtrend from $9 to $3-91 then we might all have an educated guess when that might happen. Macdunk

[JMKC]

MacDunk, the economic backwoodsman who can't understand free trade and refuses to study any economics talking about gullibility? Ha! ha! ha! Ho! ho! ho!
How many people who purchased TEL at $9.00 are still holding them? Probably nobody.
If u had listened to the presentation u would have heard Paul say that normalised net profit adjusted for Yellow Pages has decreased very slightly.
7cps fully imputed divvy, I'm still laughing.
Only idiots who take MacDunk's idiotic advice and sell take a capital loss. In the long run the share price must rise until the current gross dividend yield of 12.75% becomes a more normal level of return. That's the basis that Buffett makes long term value investment decisions on and why MacDunk will never be a multi-millionaire but looking for dollar coins in the gutter as he walks along the road.


Yeah, I've got to say, what is the catalyst for this stock now? I agree about the yield being somewhat supportive, but I also agree with Macdunk re currency...the correlation with the NZDUSD cross and TEL's sp performance is staggering. What happens when the currency rolls over and offshore holders start getting nervous? Doesn't feel like there's much upside here. Maybe $4.20 on a good bounce, but nothing to get excited about.

[JMKC]

for what reason?

[JMKC]

maybe, but only if they have a 5:1 consolidation.

Good luck donk.

[Steve]

I'm in!! This is the buy of the century. I am going to make a fortune out of this.

If Cujo is in, it must be a sign to SELL if GPG is anything to go by... ;)

[duncan macgregor]

If you can't work that out, then perhaps you should not be invested in the sharemarket.

Blind Freedy could see this is going to $20 within 2 years.NICE ONE CUJODOG. You are welcome to your opinion as every one else, it gives balance to opinion good or bad.
Two years time under $3-00 is my opinion $20-00 is yours with most people somewhere in between. I have been dead right so far with most of my estimates except when i said it would hit $3-00 before it hit $5-00. SILLY ME.
Since it lies between how would you like to lay a bottle of the good stuff on the outcome .
Let you have $5-00 me with $3-00. A gentlemans agreement to test your resolve CUJU my old mate firrt there wins. Macdunk

[p2r]

Mmmm Exporters would be happy if the Dollar had devalued as much as TEL!

And if the Clark govt could talk down the dollar like they can talk down the TCl shareprice!!

[COLIN]

If Cujo is in, it must be a sign to SELL if GPG is anything to go by... ;)

I think it is quite obvious that Cujo has his tongue firmly in his cheek again.

[winner69]

Hey MacDunk .... forget about the TEL price falling from $9 to $4 ---- did you see in the paper that yesterday the shareprice fell to where it was 14 1/2 years ago

Some punters have a long memory obviously ...... just as well for those dividends eh

[Steve]

There may be an opportunity to buy lower if you wait...

Telecom expects worse to come (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10491474)
Telecom bosses lamenting an "uninspiring" result for the half year to December say that New Zealand's biggest public company is "stretched" and its results will get worse before they get better.

Telecom's problems have come home to roost, combining in what chief executive Paul Reynolds called a "disappointing" result.

[Dr_Who]

If you can't work that out, then perhaps you should not be invested in the sharemarket.

Blind Freedy could see this is going to $20 within 2 years.

Cujo loves GPG... LOL

[Major von Tempsky]

So, I expect, logically, that all those who posted in glee that TEL had gone under $4 have now posted that it has hit $4 again? Or is logical consistency not their strong suit?

As a contrarian the best time to buy is when people are at their most pessimistic.

The TEL Directors have stated that dividend is being maintained and support is now coming in to get the approaching dividend. Gross dividend yield (today's Press) of 13.23% is too strong to be ignored. Or do you prefer to put your money in finance companies?

Gen-i, Australia is starting to perform, cabinetisation.....

[JMKC]

So, I expect, logically, that all those who posted in glee that TEL had gone under $4 have now posted that it has hit $4 again? Or is logical consistency not their strong suit?

As a contrarian the best time to buy is when people are at their most pessimistic.

The TEL Directors have stated that dividend is being maintained and support is now coming in to get the approaching dividend. Gross dividend yield (today's Press) of 13.23% is too strong to be ignored. Or do you prefer to put your money in finance companies?

Gen-i, Australia is starting to perform, cabinetisation.....

13.23% is clearly wrong, and probably has something to do with the capital return from the yellow pages last FY. The div is 7cps per quarter ie 28cps. Based on last trade of $4 that is a net yield of 7%, grossed up about 10.5%. Admittedly it is still pretty good but I doubt you will EVER see TEL trade on a gross yield of anywhere near 13%.

[JMKC]

True. TEL usually bolster the 4th quarter div...but given the payout ratio TEL said they are targeting, I find it unlikely it will be meaningful this Q4, who knows.

[Snoopy]

True. TEL usually bolster the 4th quarter div...but given the payout ratio TEL said they are targeting, I find it unlikely it will be meaningful this Q4, who knows.

Telecom's policy is to pay out 75% of earnings as dividends (after adding back relevant non cash items).

Telecom are currently projecting net earnings for the full year of $700m-$730m. Amortization for the first six months of the year was $90m (boosted by the Powertel purchase). Double that to make a year and I get an annual amortisation of $180m. The 'taxation effect' means the equivalent extra in net profit is $121m. Add that to the lower bound profit forecast of $700m and I get $821m.

75% of $821m= $616m. Based on 1.824m shares outstanding (reduced as a result of the capital return) I get a dividend of 34cps. With 21cps paid in the first three quarters, that leaves a fourth quarter payment of 13cps. At a share price of $3.82, Telecom are trading on a gross yield of 13.3%. The sensible investor can only do one thing at this price BUY. That's what I did, topping up my holding last week.

SNOOPY

discl: hold TEL

[Deev8]

Telecom's policy is to pay out 75% of earnings as dividends (after adding back relevant non cash items) ... 75% of $821m= $616m ... I get a dividend of 34cps. With 21cps paid in the first three quarters, that leaves a fourth quarter payment of 13cps.Thanks for that useful post Snoopy. Calculating beats 'guessing', 'suspecting' or 'assuming' every time.

[JMKC]

That is not a useful post actually Deev8. Wait until the analyst day on April 1 or 2 when they come out with new capex forecasts. I agree with Snoopy that they will at least uphold the 75% payout ratio, but it will be 75% off a lower base going forward. I don't think the 4th quarter div will be lower than 7cps which is what ABN are saying though.

[Unicorn]

The sensible investor can only do one thing at this price BUY.


I do not agree with that.

In rough terms TEL looks like returning between 30 and 35 cents for the year, allowing for the share cancellation at above the prevailing price. The share price is now about a dollar below where it was a year ago.

Paying a dollar to buy 30 - 35 cents in dividends does not look like a sensible investment to me.

There are some very significant risks for those investing in TEL at present.
1. TEL is in a downtrend, with no indication that it might be ending.
2. There is a lot of overseas money in TEL and if things get tighter offshore some of that will be taken back closer to home.
3. The New Zealand dollar is strong, and when it begins to fall overseas investors will be encouraged to take their capital back home.
4. The business outlook for the next year is very gloomy.
5. Operationally TEL is just not performing.

[Snoopy]

Thanks for that useful post Snoopy. Calculating beats 'guessing', 'suspecting' or 'assuming' every time.

I may have been overoptimistic with the "(after adding back relevant non cash items)" bit Deev8. I had thought that the projected annual amortisation charges probably related mostly to Telecom's most recent acquisition, Powertel. But of course since the international accounting rules came in, goodwill from purchases like that is no longer written off each year, unless it is considered impaired. So the amortization might be something to do with in company software, which is a real annual expense.

It would sure be interesting to know exactly what Telecom means by "relevant non cash items".

SNOOPY

[Snoopy]

I do not agree with that.

In rough terms TEL looks like returning between 30 and 35 cents for the year, allowing for the share cancellation at above the prevailing price. The share price is now about a dollar below where it was a year ago.

Paying a dollar to buy 30 - 35 cents in dividends does not look like a sensible investment to me.


Unicorn, the price of Telecom shares on 31st March 2007 was $4.73. Let's say you owned 9 shares back then. The total value of your Telecom investment was:

9 x $4.73= $42.57

One year later you only have 8 shares valued at $3.78 (as one in 9 have been cancelled). The total value of your Telecom investment is now

8 x $3.78= $30.24.

However in the interim you have had a one off payment of $4.88 (the share that was cancelled half way through the year) and the following dividends:

(0.07+0.07)(8) +(0.145+0.07)(9)= $3.06.

That lot adds up to 'benefits per 8 shares at the end of the year' - for the year of:

$3.06+$4.88= $7.94

So your total loss for the year was:

$42.57-($30.24+$7.94)= $4.39 or just over 10%.

Not a great result. But not that bad, considering where the market has gone.

Your claim that Telecom investors have lost 65 to 70 cents per share, around 15%, is wide of the mark.



There are some very significant risks for those investing in TEL at present.
1. TEL is in a downtrend, with no indication that it might be ending.


Not necessarily a risk going forwards.



2. There is a lot of overseas money in TEL and if things get tighter offshore some of that will be taken back closer to home.
3. The New Zealand dollar is strong, and when it begins to fall overseas investors will be encouraged to take their capital back home.


Yes, but if that happens that does not affect the operational performance of Telecom. If your investment horizon is long enough, overseas selling won't make any difference. It will be balanced out by 'overseas buying' next time the dollar rises.



4. The business outlook for the next year is very gloomy.
5. Operationally TEL is just not performing.


The TEL PE is now under 10, which has already priced in lower earnings this year. Best to wait until the wholesale division is up and running before you can judge if Telecom is 'really performing' I think. Last year Telecom went exceptionally well operationally, the best performance this century in fact. It will be only natural for it to come back a bit this year.

SNOOPY

[Steve]

Keep up with your analysis, Snoopy!

I like following your numbers... :)

[JMKC]

The TEL PE is now under 10, which has already priced in lower earnings this year. Best to wait until the wholesale division is up and running before you can judge if Telecom is 'really performing' I think. Last year Telecom went exceptionally well operationally, the best performance this century in fact. It will be only natural for it to come back a bit this year.

SNOOPY

The TEL P/E is under 10 based on historical earnings, but I fear there is a lot of uncertainty around the E part of the P/E next FY.

Snoopy, what do you base your statements re their operational performace on? Which division are you talking about? I can't think of one division that performed well let alone the best performance of the century (by which I take it to mean the last 8 years).

You should have a look at the correlation between the NZDUSD pair and TEL. Unicorn is right. The correlation is huge. It is fine to say look through the ccy cycle, but given the carry trade has gone on a lot longer than people expected, who's to say when the NZD falls it doesn't go through a prolonged period of weakness?

[Unicorn]

Hi Snoopy

A few approximations aside, I stand by the general thrust of my post.


Not a great result. But not that bad, considering where the market has gone.

A bad result for the investor in my book. A loss is always bad. The investor who got out a year ago is much better off than the investor who remained with TEL.


Your claim that Telecom investors have lost 65 to 70 cents per share, around 15%, is wide of the mark.

We agree there was a 10% direct loss. Then the TEL investor has missed out on the 5-6% nett that a safe term deposit would have returned. I don't see that as being wide of the 13-15% range I indicated.


Not necessarily a risk going forwards.

I think it is, in the short term at least. Buying into downtrends is risky, the longer the downtrend the greater the proportion of those buying into it will be pay more than they need to. Given the rather precarious global financial position at present it is extra risky right now.


Yes, but if that happens that does not affect the operational performance of Telecom. If your investment horizon is long enough, overseas selling won't make any difference. It will be balanced out by 'overseas buying' next time the dollar rises.

You seem to be saying not to worry if it goes down a bit, because it will then come right later. I say it is better to wait until it has gone down a bit, then buy - you will definitely make more profit in that scenario.

[Snoopy]

Snoopy, what do you base your statements re their operational performance on? Which division are you talking about? I can't think of one division that performed well let alone the best performance of the century (by which I take it to mean the last 8 years).


I am talking about the whole company.

Operating earnings per share during FY2007 were 42.4c (excluding the Yellow Pages Group earnings and profit from the YPG sale). That is the best 'eps' figure for the 'noughties' (excluding YPG) by my count.



You should have a look at the correlation between the NZDUSD pair and TEL. Unicorn is right. The correlation is huge. It is fine to say look through the ccy cycle, but given the carry trade has gone on a lot longer than people expected, who's to say when the NZD falls it doesn't go through a prolonged period of weakness?


If the currency NZD/USD currency relationship falls you might be right JMKC. But what happens if the NZD does not fall relative to the USD? What happens if it keeps going up?
The point I was making was that if you don't have to sell, it doesn't really matter what the share price of TEL does if you are happy with the income stream.

SNOOPY

[Snoopy]

A bad result for the investor in my book. A loss is always bad. The investor who got out a year ago is much better off than the investor who remained with TEL.

We agree there was a 10% direct loss. Then the TEL investor has missed out on the 5-6% nett that a safe term deposit would have returned. I don't see that as being wide of the 13-15% range I indicated.


I take on board your argument Unicorn. Your maths is right, but I don't agree with the measuring stick you are using. I always compare my individual share market investments in the context in which they operate. For Telecom, that means my measuring stick is the NZX50.

Your comparison would require you to 'know in advance' that FY2008 was to be a bad year for Telecom so that you could pull out and reinvest in fixed interest.



I think it is, in the short term at least. Buying into downtrends is risky, the longer the downtrend the greater the proportion of those buying into it will be pay more than they need to. Given the rather precarious global financial position at present it is extra risky right now.


What you say is true Unicorn, provided the number of people buying into the downtrend is the same all the way along as the downtrend continues lower. If most people buy in near the bottom of the trend then what you say is not true.

Furthermore whatever China does in Tibet or whether Hilary or Obama becomes Democrat nominee I pick will make no difference to the demand for telecommunications services within Australia and New Zealand. And people will still make phone calls and blog the net no matter what their financial position.



You seem to be saying not to worry if it goes down a bit, because it will then come right later. I say it is better to wait until it has gone down a bit, then buy - you will definitely make more profit in that scenario.


I tend to 'value average'. That means deciding the amount of money I want to spend on a particular share in advance with the share price on the day determining the number of shares I actually buy. Thus when the share price is low I end up buying more shares. It works for me. So I guess that means I agree with you Unicorn, on your point.

SNOOPY

[duncan macgregor]

I do not agree with that.

In rough terms TEL looks like returning between 30 and 35 cents for the year, allowing for the share cancellation at above the prevailing price. The share price is now about a dollar below where it was a year ago.

Paying a dollar to buy 30 - 35 cents in dividends does not look like a sensible investment to me.

There are some very significant risks for those investing in TEL at present.
1. TEL is in a downtrend, with no indication that it might be ending.
2. There is a lot of overseas money in TEL and if things get tighter offshore some of that will be taken back closer to home.
3. The New Zealand dollar is strong, and when it begins to fall overseas investors will be encouraged to take their capital back home.
4. The business outlook for the next year is very gloomy.
5. Operationally TEL is just not performing. This is by far the most enlightened post on this thread so far. TEL are sitting on a fifteen year low which says a lot for buying and holding long term. Whats the use of a twelve pc divi if the sp drops ten pc with inflation running at four pc. Great oportunity coming up at the end of the year for the averaging down brigade to lose some more in this down trending stock.
I expect the sp to continue to drop more than the dividend, adjusted to inflation, as it has done for years. I can remember all the great fundamentalist predictions when the sp was more than double todays. Fundamental analysis is useless in predicting the market as SNOOPY is proving beyond all reasonable doubt. Macdunk

[manxman]

TEL are sitting on a fifteen year low ...

I expect the sp to continue to drop more than the dividend, adjusted to inflation, as it has done for years.

Just noting that the NZX10 is approaching 1000 in the Downwards direction. Does this mean that TEL has destroyed as much value as all the other companies in the index combined have created, or was there another dog somewhere which had to be shot? Will TEL drag the NZX10 below 1000?
How soon?

Mx

[beacon]

All stocks will be seen as dogs in the current market. Maybe they are - compared globally

[duncan macgregor]

Predicting the market is not really fundamental analysis's job. The purpose of fundamental analysis is to estimate how much shares are worth. Market prices fluctuate too much for that.
hiawatha That what share investing is all about its predicting tomorrows market using todays sign posts. Yesterdays fundamentals of company doctored up reports and profits are a waste of time. Look at all SNOOPIES glowing reports on TEL buying more all the way down as an example. Why is it that most TA investors are sitting on the side lines waiting on buy signals to front up. The market is a much better indicator of when to buy, and when to sell than last years company reports. The price of anything is governed by the eye of the beholder. The beholder is the market in this instance, study the market trend not the company propaganda. Macdunk

[AMR]

Snoopy, I tremendously respect your analytical ability but do you have any money management strategies with regard to TEL aside from averaging down? At what point will you say "TEL has failed to live up to expectations" and bail?

[Nitaa]

That what share investing is all about its predicting tomorrows market using todays sign posts. Yesterdays fundamentals of company doctored up reports and profits are a waste of time. Look at all SNOOPIES glowing reports on TEL buying more all the way down as an example. Why is it that most TA investors are sitting on the side lines waiting on buy signals to front up. The market is a much better indicator of when to buy, and when to sell than last years company reports. The price of anything is governed by the eye of the beholder. The beholder is the market in this instance, study the market trend not the company propaganda. Macdunk
I have to agree with Hiawatha. You also implying that fundamentals by Tel were good but the price kept going down. I disagree 100%. Fundamentally they were in a precarious position and one that the government didnt want to alow them to take too much of an advantage with their monopoly. RDB is another of Snoppys that didnt have the fundamentals. Saturrated (fat.. no pun intended) market, sunset stock, competitors nibbling at them left right and centre..

[Snoopy]

Snoopy, I tremendously respect your analytical ability but do you have any money management strategies with regard to TEL aside from averaging down? At what point will you say "TEL has failed to live up to expectations" and bail?

AMR, my TEL strategy is dependent on factors within Telecom itself rather than the market reaction to them.

As a yield play I want a couple of percentage point return above term deposit rates. I am certainly getting that.

I want to make sure the debt position of the company is conservative in relation to both the level and kind of earnings. Last year TEL had so much capital on hand, they handed a big chunk of it back to shareholders. That tells you how short of cash they are.

I also want to make sure that my overall position in Telecom is not so out of line with my other NZX investments that my portfolio becomes overweight in Telecom to a serious extent.
Telecom is my largest investment, but not seriously larger than my number two investment so things are OK there.

I also like to invest when there is plenty of market fear around, because that will drive down the share price. With the uncertainty around how Telecom's wholesale division will bed in, there is certainly plenty of fear in the air!

As a value investment, probably the triggers that would see me get out of TEL are as follows.

1/ If Telecom has to spend too much of their profit servicing their debt.
2/ If the cumulative total of:

"Operating Revenue"-"Capital Expenditure"

starts to shrink below the cumulative total of profits. If that happened, it would indicate that Telecom are not generating enough profit to repair and rebuild their asset base. But there is no sign that Telecom are in any trouble here either.

My fair value for Telecom is currently around $5.20. At some point the market will overshoot that figure and I might consider reducing my holding then.

But as for selling out completely well, you have to bear in mind that most investors do not beat index funds. I would have to have a very strong reason to *not* hold any Telecom, (which still makes up the largest chunk of those NZX index funds), before I completely sold out. Management certainly made a blunder assuming unbundling would not happen, and the share price has already been punished to reflect that. But that incident aside, Telecom strikes me as a well run company. So I'll probably be plastering my Telecom share certificate into my gravestone.

SNOOPY

[duncan macgregor]

I have to agree with Hiawatha. You also implying that fundamentals by Tel were good but the price kept going down. I disagree 100%. Fundamentally they were in a precarious position and one that the government didnt want to alow them to take too much of an advantage with their monopoly. RDB is another of Snoppys that didnt have the fundamentals. Saturrated (fat.. no pun intended) market, sunset stock, competitors nibbling at them left right and centre.. NITA,I have never ever said TEL fundamentals are good. The position in the market place gets it into a worsening position every year. TEL have more competition more GOVT interferance each year driving the sp down. SNOOPY is oblivious to reality if you take a look at his portfolio. Macdunk

[HarryFlashman]

IMHO this comnpany faces a long term decline and I don't know who is going to fix it or how - or even if it can be fixed.

I've never been a TEL fan in fact I have always loathed the company for its arrogance, appalling customer service, and useless fat-cat management.

They had a clueless CEO who clung on to her $2m pa role in the most shameless manner and when she eventually did go (after a protracted Blair-like farewell) got almost $2m for entering into some sort of non-compete agreement. This was obscene - most TEL shareholders would have loved her to join a competitor and do for them what she did for Telecom.

As for the current siuation - poor performance getting steadily worse and the company looks like a slow-motion train wreck. The new CEO has done nothing in terms of bringing in the new management the place desperately needs, instead reshuffling the same old idiots. Where is the new CFO? I can't see any of Paul's old mates giving up well paid jobs in the UK to come to NZ to work for TEL. Dr Reynolds himself seems to be overseas a lot and has just taken up a directorship of a company based in London.

Not a lot happening at TEL, CEO often absent, no new management. I reckon Dr Reynolds has at last grasped the full horror of what he has taken on. Whether he is up to the job or not who knows but I reckon he'll be out of there within 6 months and back in the UK enjoying a few cosy non-exec board roles and his huge BT pension - and a big NZD payout from TEL too no doubt.

What a shambles!

Cheers
Harry

[Deev8]

The new CEO has done nothing in terms of bringing in the new management the place desperately needs, instead reshuffling the same old idiots. Where is the new CFO? I can't see any of Paul's old mates giving up well paid jobs in the UK to come to NZ to work for TEL. From today's Herald:

Briton is Telecom's new finance chief (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10501468)

A former colleague of Telecom boss Paul Reynolds is joining him in New Zealand as the telco's new chief financial officer.

Russ Houlden, who was finance director at British Telecom Wholesale when Reynolds was its chief executive, takes over from Marko Bogoievski ...

Houlden's appointment leaves only one senior role vacant - the position of head of the retail unit vacated by Kevin Kenrick.

Former BT executive Shelley Grey already heads its public affairs department, overseeing Telecom's communications and regulatory teams.

[Major von Tempsky]

Shoot! - me agree with Belge?
Who would ever a thunk it?
TEL nearly back up to $4 already.
Let's all make a note in our diaries, let's all harass the heck out of economic backwoodsman Dunk MacGregg when the market starts overshooting TEL's worth somewhere well north of $5.00.
Tell us about your finance company investments Dunk...and all the other losing ones....

[duncan macgregor]

Shoot! - me agree with Belge?
Who would ever a thunk it?
TEL nearly back up to $4 already.
Let's all make a note in our diaries, let's all harass the heck out of economic backwoodsman Dunk MacGregg when the market starts overshooting TEL's worth somewhere well north of $5.00.
Tell us about your finance company investments Dunk...and all the other losing ones.... MVT, I dont have finance company investments. TEL will continue to downtrend as it has done for the last 15 years. Macdunk

[Phaedrus]

http://h1.ripway.com/Phaedrus/TEL43.gif

[Sumnerned]

Telecom have got a lot of good people working for them in middle and lower management positions but their strategies have been awful.

Mobile - A disaster. 025 no texting, 027 no roaming, now this crazy dual mode stuff. Sooner rather than later they'll have to go the Vodafone GSM way.

Xtra - A disaster. Well documented and often in the news. This could easily have been the jewel in Telecom's crown, but for a long time they were mostly interested in flicking it off.

Broadband - A disaster. We still pay too much for too little. Why should we have to put up with all this data cap stuff, and last century speeds.

Southern Cross Cable - An Outrage. What can possibly justify the charging systems for this which means it's cheaper to have an overseas ISP than an NZ one. If it weren't for the fact that it's international, it would probably be illegal. (helps the Telecom bottom line big time tho.) After the unbundling and corporate restructuring has settled down they'll probably be forced to address this too.

Anyone who held shares in this shambles under the previous regime was taking a huge gamble. Maybe the Brits can sort it out.

[Major von Tempsky]

Actually if u invest part of your portfolio for tax free dividends as I do and many others, then it's been doing incredibly well for an alleged "disaster", in fact its pretty hard to pick another company on the NZX with dependable dividends. Or a finance company apart from SCF that isn't in danger of going under.
We have a number of people who should declare their (or their friends/relatives) interest in Telecom competitors so we can fairly evaluate their cheap off the cuff comments.

[warthog]

Telecom have got a lot of good people working for them in middle and lower management positions but their strategies have been awful.

Really? The hog would say that TEL are heavy in middle and lower management.


Mobile - A disaster. 025 no texting, 027 no roaming, now this crazy dual mode stuff.

Can only agree. Terrible decisions.


Sooner rather than later they'll have to go the Vodafone GSM way.

Well it's sooner rather than later as this has already begun.


Xtra - A disaster. Well documented and often in the news. This could easily have been the jewel in Telecom's crown, but for a long time they were mostly interested in flicking it off.

They should have built it quickly and spun it out in 1999-2000, retaining a holding.


Broadband - A disaster. We still pay too much for too little. Why should we have to put up with all this data cap stuff, and last century speeds.

Because people vote for politicians who are lacking in the balls department (in multiple senses).

However, NZ is a small country with very low population density. Things. Cost. More. Fact of life.


Southern Cross Cable - An Outrage. What can possibly justify the charging systems for this which means it's cheaper to have an overseas ISP than an NZ one. If it weren't for the fact that it's international, it would probably be illegal. (helps the Telecom bottom line big time tho.) After the unbundling and corporate restructuring has settled down they'll probably be forced to address this too.

Bandwidth will slowly be exposed to larger forces.


Anyone who held shares in this shambles under the previous regime was taking a huge gamble.

For at least the last decade, yes. They were - some might say - relying on Gattung's ability to blackmail the government to not regulate, and *still* screwing it up.


Maybe the Brits can sort it out.

They have much more experience with brinkmanship and effective PR management of politics and the market. They can hardly do worse.

[duncan macgregor]

Actually if u invest part of your portfolio for tax free dividends as I do and many others, then it's been doing incredibly well for an alleged "disaster", in fact its pretty hard to pick another company on the NZX with dependable dividends. Or a finance company apart from SCF that isn't in danger of going under.
We have a number of people who should declare their (or their friends/relatives) interest in Telecom competitors so we can fairly evaluate their cheap off the cuff comments.
That is where you and i differ MVT. I look on dividends as a bonus extra that waters the sp down, you look on dividends as income. I look at the whole picture, you look at one little part of the picture. Look at the record that you so proudly wave to enlighten us lesser mortals.
TEL were at a fifteen year low a couple of weeks ago. Skite on, and rave all you like about that if you can. Tell us about those dividends again, or how TEL is in a much better position now than it was then. TEL is on skid row the competition is growing, the perception of the company in the public eye is at an all time low plenty of opportunities to continue to average down. Macdunk

[duncan macgregor]

HIAWATHA, The only thing that matters in investing is to increase your capital. The company should be looked on only as a means to that end. The dividends should be higher than the bank rate to cover the extra risk, plus the share price should increase at least by the rate of inflation. TEL share price has remained at the level it was at 15 years ago in a period that property increased in value by at least 10% per annum. For anyone to say that buying and holding TEL as a long time investment has been a good investment is so far out of touch with reality that they deserve to go broke. The only people to make money on TEL are the people smart enough to buy and sell the rises and falls in the share price. Other than that they are pissing in the wind. Macdunk

[Major von Tempsky]

Poor old MacDunk has a very convenient memory. I have pointed out to him on numerous occasions that I was in on the float and sold out in pieces between $8 and $9.
I bought back in between $4 and $5.
I never bought at the $9 to $10 dollars graph that he keeps displaying and I very much doubt if you would find any sizeable present holders who did.
Hence his conclusions from that are in practical terms - rubbish.

Even more seriously for MacDunk and the other professional obsessive TEL haters....try reading the TEL notice today.
You'll find that AXA one of the largest insurer/investment organisations in the world has just been forced to make an opening SSH discloser statement i.e. they have very recently built up a big enough stake in TEL to be forced to disclose.

Now if its a choice between the economic backwoodsman MacDunk's amateur analysis and AXA's professional, successful long track record analysis....I'd go with AXA everytime and so would the readers who don't have an axe to grind.

[Sumnerned]

Hi Warthog

Could argue some of the details, but broadly I agree with your comments.

If Telecom have a poor management structure, that's another bad strategic decision. My comment was about the individuals I have encountered over the years, many of whom have impressed me.

[Yossarian]

Tel certainly been doing well this week - is it all down to AXA?

[Phaedrus]

I bought back in between $4 and $5.

MvT, You in fact bought back in to TEL at the equivalent price of $6.36 when you bought TELIUA at $3.36, with $3 to come in Jan 2007. The high yield that you secured was engulfed by huge capital losses sustained as the downtrend progressed.

http://www.snitzforum.sharetrader.co.nz/images/icon_posticon.gifPosted - 07/10/2005 : 4:01:56 PM http://www.snitzforum.sharetrader.co.nz/images/icon_profile.gif (http://www.snitzforum.sharetrader.co.nz/pop_profile.asp?mode=display&id=6053) Decided I would finally accede to Snoopy's advice and added TEL to my portfolio this morning.
I did this by buying 40,000 TELIUA - they're at/near their historic low.
This way I get nearly twice the dividends (from buying 22,800 TEL with the same amount of money) for 1.75 years and I can either shell out the requisite $3 to convert them to ordinary TEL in June 2007 or sell out on an appropriate upwards spike first.

http://h1.ripway.com/Phaedrus/TELIUA001.gif


Reference threads :- TEL, TELIUA and Timing. (http://www.snitzforum.sharetrader.co.nz/topic.asp?TOPIC_ID=23209)

TEL chart, TELIUA, maximising yield. (http://www.snitzforum.sharetrader.co.nz/topic.asp?TOPIC_ID=21615)

[Major von Tempsky]

Strange thing, I've commented several times ..... that was only a minor part of my purchases and activity and yet you keep thinking that only Mum and Dad investors are active on the NZX.
Hence your conclusions are inaccurate.

[duncan macgregor]

Strange thing, I've commented several times ..... that was only a minor part of my purchases and activity and yet you keep thinking that only Mum and Dad investors are active on the NZX.
Hence your conclusions are inaccurate. I am definately on your side in this MVT i wrongly thought you were among the ZOMBIE type hold and average down, brain dead investor. It seems according to your latest comments that you actually think about, not only buying, but actually selling according to market performance. How could i get it so wrong. Shame on you PHAEDRUS for exposing minor little statements the good major made in the distant past. YOUR OLD MATE MACDUNK

[Major von Tempsky]

I have to agree with MacDunk here.
You Hiawatha are guilty of not reading properly, you read what you wanted to read rather than what was actually there.
The fact that it was a minor part of my activity affects the weighted averaging result which is still ok and also that I sold out of those instruments and bought back in TEL at lower prices.
Phaedrus assumes, amongst all the chicken entrail reading and horoscope casting, one transaction is all that takes place because the usual case is the Mum and Dad investor and they let it all hang out.
I pointed out that I am not a Mum and Dad investor, I have a number of sizeable transactions, buying and selling at different times both instruments and head shares. And if I wasn't successful I wouldn't still be here. And no I am not going to detail it all as I have said before (who else does apart from Mum and Dad investors?) for obvious IRD reasons.
And I note TEL are up to $410 this morning :-).

[Phaedrus]

While MvT was ultimately effectively buying into TEL at $6.36, in the meantime he was "investing" in an instrument that was heading South even faster than TEL. TEL was then in a steady downtrend of about 10% pa (it later steepened) while TELIUA was in a much steeper downtrend (over 30% pa). The longer he hung in there, the more he lost.

This was an ill-advised and badly timed investment and we can all learn from MvT's mistakes. Where did he go wrong? I guess you will all have your own individual views, but to me it was very simple. He bought into a downtrending stock. The downtrend continued. He lost money. Happens all the time!

[Naylz]

I hold Tel shares that I bought at 4.90. I have been sitting on them and watching them not so slowly but surely lose value. My idea was to just ride this out and take the dividends and be in it for the long term. Telecom does make up about 40% of my portfolio so has a big effect on my retirement plan.

There is a lot of pro and anti Tel sentiment expressed here. My thoughts are that if I could get a dividend of 35 cents a year on a share at 3.80, (any other company) I would purchase this now hoping for a long term capital gain as well.

My biggest fear in selling, is that I will be selling at the trough and am therefore inclined to stick to my original plan and just hold.

Thoughts?

[Phaedrus]

At this point, you have little option but to stick to your original plan, Naylz. Hold.
You would be silly to sell TEL at this stage and given that it already comprises 40% of your portfolio, buying more would not be a good idea.

Naylz, Do you realise that you bought TEL just when it was triggering SELL signals?
Do you realise that, if you sold now, you would be selling just when TEL is triggering BUY signals?

I take it that you do not use technical analysis at all - or perhaps you are a dedicated TA contrarian!!!!

http://h1.ripway.com/Phaedrus/TEL49.gif

[Snoopy]

I hold Tel shares that I bought at 4.90. I have been sitting on them and watching them not so slowly but surely lose value. My idea was to just ride this out and take the dividends and be in it for the long term. Telecom does make up about 40% of my portfolio so has a big effect on my retirement plan.

There is a lot of pro and anti Tel sentiment expressed here. My thoughts are that if I could get a dividend of 35 cents a year on a share at 3.80, (any other company) I would purchase this now hoping for a long term capital gain as well.

My biggest fear in selling, is that I will be selling at the trough and am therefore inclined to stick to my original plan and just hold.

Thoughts?

Naylz, your buy price is irrelevant, unless you can find some way to go back in time and not do it!

I would say 40% of a portfolio being made up of one share is too high though, no matter how good that share is. One thing you could do is transfer some of your money out of Telecom to shares that have been hammered down even more than Telecom. Thus 'relatively' you would be getting a good deal. I would start by looking around some of the exporters which really have been unmercilessly beaten down in price. Firms which are not totally dependent on the US market and the NZD/USD exchange rate might be favoured!

You think you might be in line for 35cps dividend from Telecom every year into the future? Telecom has been very quiet about their medium term prospects, until yesterday. Let's see how your expectation, Naylz, stacks up against the latest Paul Reynolds proclamation.

---------------

We are planning containment of near-term EBITDA decline 4-6% in the
financial year to June 30 2009 and 0-2% for the financial year to June 30
2010 beforine subsequent growth of 4-6% per annum in the financial years June
30, 2011 to June 30, 2013.

- We are forecasting investment of capital expenditure of NZ$1 billion to
NZ$1.1 billion in the financial year to June 30 2009

- Our dividend policy remains unchanged at a 75% pay-out ratio, but for FY09
& FY10, subject to no material adverse change in circumstances we will target
the higher of 75% of reported earnings (after adding back relevant non-cash
items) or 24 cps with quarterly dividends of 6 cps

---------------

A 4 to 6% EBITDA decline for FY2009 followed by a 0 to 2% EBITDA decline for FY2010 multiplies out to a 4 to 8% decline in EBITDA over the next two years. However the decline in earnings will be greater than that. Capital expenditure has gone up by around 25% per year (or around $250m) since the unbundling announcement. As all that extra capital equipment flows through the system depreciation will increase by something like $25m per year, cumulatively. Thus over three years something like $75m worth of depreciation will knock a 0.7x$75m= $52.5m annual hole in profits. In the worst case that all adds up to a profit decline of some $100m per year. Of course that assumes no improvement in Australia, the failure of Telecom's mobile expansion strategy (and all their other expansion strategies) and that all of their new network expenditure will result in no new wholesale business.

$600m-$620m equates to 33 to 34cps. A payout ratio of 75% means a dividend rate of 24 to 24.5cps in FY2010. Interestingly that is exactly the figure that Reynolds has 'guaranteed' as a minimum dividend payment in FY2010.

33 to 34cps at a PE of 15, means a share price of $4.95 to $5.10. So in the medium term Naylz, I reckon your capital, that you laid out at $4.90, is safe. On a yield basis 24cps at a share price of $3.60 is a gross yield of 10%. On that basis I would pick $3.60 as a kind of medium term bottom if everything within the company goes 'not according to plan'.

SNOOPY

discl: hold TEL

[duncan macgregor]

I think at $3-61 it says it all. Remember it is at a fifteen year low. All the analysis in the past by long term fundamentalists are proved with hindesight to be way off the mark.
No self respecting TA investor would ride a share down like this without getting out. Fundamental analysis is as useless as tits on a bull. MVT and SNOOPY cheer me up tell me about those dividends all over again [i need a laugh]. I hope your mistakes and loss of capital is not for nothing, and is teaching newbies how not to invest. THREE DOLLARS HERE WE COME. Macdunk

[Deev8]

Do you realise that, if you sold now, you would be selling just when TEL is triggering BUY signals?


THREE DOLLARS HERE WE COME.Just make it a clean fight boys.

[duncan macgregor]

Just make it a clean fight boys.nothing at all to fight about DEEV8. Phaedrus and i are both out the market with PHAEDRUS having a few small plays to ease the boredom. We are both in agreement about the state of the market with both of us in agreement about the long term downtrend of TEL.. Even a doggy company will show buy signals from time to time. In prolonged uptrends it pays to lower your stop loss. In prolonged downtrends such as TEL it pays to raise your buy signal. The only people fighting are the long term investors fighting off bankruptsy. Macdunk

[Snoopy]

Phaedrus and i are both out the market with PHAEDRUS having a few small plays to ease the boredom. We are both in agreement about the state of the market with both of us in agreement about the long term downtrend of TEL.. Even a doggy company will show buy signals from time to time. In prolonged uptrends it pays to lower your stop loss. In prolonged downtrends such as TEL it pays to raise your buy signal. The only people fighting are the long term investors fighting off bankruptcy. Macdunk


Unlike Phaedrus and you Macdunk, I don't get excited with buy signals that whirls me up into a share then spits me out in the next market wave. With Telecom I am in it for what comes out the other end of the restructuring process, in however many years that takes. In the meantime I am quite happy to sit on my 'dividend flow' as a tonic.

Of course I would have preferred to have bought all my shares at today's prices ($3.60ish). But one cannot be sure exactly how low the share will go before it takes off again. There is no guarantee that a breakout won't be a false dawn. I think that even Phaedrus has commented on the difficulties of trading Telecom because of the inconsisteny of the T/A indicators that seem to drive the share price. Naturally having Telecom as a proxy for the $NZ doesn't help things.

In the end, for the long term investor, none of this will be remembered. When the 'new' Telecom gets put on the weighing machine it will be worth exactly what new CEO Paul Reynolds has transformed it into, all transient garbage of whipsawing share price aside.

SNOOPY

[BDLBOM]

I never held any before but bought a small stake yesterday. I also quite like the idea of sitting on a respectable dividend flow.

[duncan macgregor]

I never held any before but bought a small stake yesterday. I also quite like the idea of sitting on a respectable dividend flow. The sp is down to $3-58 and dropping. At what level will you admit the mistake, and sell?. Remember this share price was over $9-00 with people like you in it for the dividends still holding. The reinvested dividends over the last 15 tears [sorry years] has been less than leaving the money in the bank if you take loss of capital into account. History has a habit of repeating learn from other peoples mistakes. Macdunk

[COLIN]

The sp is down to $3-58 and dropping. At what level will you admit the mistake, and sell?. Remember this share price was over $9-00 with people like you in it for the dividends still holding. The reinvested dividends over the last 15 tears [sorry years] has been less than leaving the money in the bank if you take loss of capital into account. History has a habit of repeating learn from other peoples mistakes. Macdunk

As the old saying goes, "there are none so blind as those who do not want to see." Its impossible to convince some people of their folly in riding Telecom all the way down, but I do accept that there will come a time when even I might consider taking up a few TEL shares to put into the base of my portfolio - but not for a year or two yet.

[Deev8]

Even a doggy company will show buy signals from time to time ... In prolonged downtrends such as TEL it pays to raise your buy signal.That's just downright confusing - you're telling us that it was a buy signal that wasn't really a BUY signal, but some other type of 'buy signal' that really means don't buy.

[AMR]

Even a doggy company will show buy signals from time to time ... In prolonged downtrends such as TEL it pays to raise your buy signal.
That's just downright confusing - you're telling us that it was a buy signal that wasn't really a BUY signal, but some other type of 'buy signal' that really means don't buy.

What Duncan means is....in a volatile downtrend it is possible for shares to spike and generate false buy signals, like what we've seen with the indices.

I note that Phadreus's would have reversed and gotten out at a small loss, but that's the thing with TA. You are risking a small loss for a much larger gain.

[duncan macgregor]

That's just downright confusing - you're telling us that it was a buy signal that wasn't really a BUY signal, but some other type of 'buy signal' that really means don't buy.DEEV8 dont try and confuse the issue to suit your argument. TEL have been in a prolonged downtrend for years. Only a fool would take a dead cat buy signal on the way down without a confirmed uptrend. Its the opposite on a prolonged uptrend you can drop your stop loss level to suit the trend. TEL did show a buy signal which was shortlived and will probabely do so again but nobody in there right mind would jump in until a decent trend up is confirmed. I take it you are a buy and hold down the gurgler type of investor with no sell system. TEL will hit $3-00 you can tell me about the dividends then. Macdunk

[Steve]

DEEV8 dont try and confuse the issue to suit your argument.

But that is what 99% of ST posters do, isn't it? It doesn't matter what the issue is, just as long as their opinion is correct... ;)

Disc: Have been known to confuse issues to suit my argument.

[duncan macgregor]

But that is what 99% of ST posters, isn't it? It doesn't matter what the issue is, just as long as their opinion is correct... ;)

Disc: Have been known to confuse issues to suit my argument.I must be the one per cent having A MACDUNK GOT IT WRONG THREAD. macdunk

[Phaedrus]

For a long, long time, whenever Snoopy said he was buying more TEL I would kindly post a chart showing the ongoing downtrend and unbroken trendline, along with the helpful suggestion that delaying any such purchase would be a good idea. On 3/4/08, TEL broke its trendline so I felt honour-bound to post a chart drawing attention to this fact. It was posted without any comment. In the light of subsequent divergent opinions as to the meaning and import of this trendline break, here is a commentary to go with the page 49 chart.

Today, TEL broke above its 4 month trendline. Because this "breakout" was on smaller than average volume, it should be regarded with caution. Without volume any rise will quickly lose momentum. While trendline breaks can and do provide excellent entry and exit signals, it is not good practice to act on a single signal from any one indicator used in isolation. What you are looking for is confirmation from another indicator, or some degree of consensus. I have often mentioned the use of trendlines drawn with the On Balance Volume indicator as providing excellent confirmation of trendline breaks plotted on the price chart. You can see that, while an OBV trendlinebreak gave excellent confirmation of the "Sell" signal of February 2007, no such "Buy" confirmation has yet occured for this latest signal.

http://h1.ripway.com/Phaedrus/TEL413.gif

Deev8, I was pointing out to Naylz that his actions were totally out of synch with TEL price movements. He bought when TEL had given unequivocal Sell signals, and was considering selling when TEL had just given a Buy signal - even though this single weak, unconfirmed signal had in fact already failed at the time of these comments. (The uptrend had abruptly ended and price action had fallen back to beneath the trendline again.)

The red dots on this chart mark where fundamental "value" investors bought TEL. Generally speaking, their rationale was usually along the lines of "I value TEL at $6.92. Therefore at $6 or less it is a bargain and should be part of everyone's portfolio". The high dividend yield was often cited.

Snoopy once wisely stated.... "The question is whether the method you are using to choose your investment is giving you the right signals".
Periodically, we should all evaluate our methods in that light.

[Deev8]

DEEV8 dont try and confuse the issue to suit your argument. I'm not trying to confuse the issue to suit my argument, because I really don't mind whether the Telecom chart was showing a buy signal or not. I merely observed that Phaedrus had indicated a buy signal for Telecom (indicated by the bold green BUY annotation on the chart that he posted), but you were of the opinion that under current circumstances that wasn't really a signal to buy the shares.

When you post an explanation that sometimes a BUY signal isn't actually a signal to buy you have managed to confuse the issue all by yourself.

http://h1.ripway.com/Phaedrus/TEL49.gif


I take it you are a buy and hold down the gurgler type of investor with no sell system.You're quite wrong on that score -- I've certainly never advocated buy and hold never sell as an investment strategy.

[Deev8]

Deev8, I was pointing out to Naylz that his actions were totally out of synch with TEL price movements. He bought when TEL had given unequivocal Sell signals, and was considering selling when TEL had just given a Buy signalA perfectly reasonable observation.

[duncan macgregor]

Nobody in their right mind would take a buy signal in a company that has been in a long term downtrend seriously. TEL were over $9-00 at one stage they are now $3-58 with my buy signal at $3-90. If you muck about with losers you become one.
All the fundamental anaysists over the years have been 100% wrong if you read back in hindesight.
Why did they get it so wrong still bleating on about how right they were is a good lesson to take on board for new investors. Will it ever come right is more to the point are its prospects improving or worsening. TEL has worsening prospects with a poor public image increased competition and has a lesser monopoly. It also has a shareholder base playing with the exchange rate which looks set to lose its advantage. Macdunk

[Nitaa]

Nobody in their right mind would take a buy signal in a company that has been in a long term downtrend seriously. TEL were over $9-00 at one stage they are now $3-58 with my buy signal at $3-90. If you muck about with losers you become one.
All the fundamental anaysists over the years have been 100% wrong if you read back in hindesight.
Why did they get it so wrong still bleating on about how right they were is a good lesson to take on board for new investors. Will it ever come right is more to the point are its prospects improving or worsening. TEL has worsening prospects with a poor public image increased competition and has a lesser monopoly. It also has a shareholder base playing with the exchange rate which looks set to lose its advantage. MacdunkMD. Have you ever stopped to think that it was the traders and fundies such as yourself that drove it up to $9.00 and the fundamentalists bailed before its decisive decline? What you need to understand my friend is that not all traders do what you do and so called fundamentalists see the fundamentals differently from others.

P has a buy signal at $3.85.. you have a buy signal at $3.90.. if i was a trader the buy signal for me the other dau would need to have reached $4,20. Of course every day goes by the buy signal will be different for a trader. As a fundamentalist which i am more enclined to be, this stock simply isnt on my radar at the moment. It hasnt been for as long i can remember. There is too much unknown appart from bad news followed by bad.

Personally i dont care if something happens to this stock and it doubles in price over night. This type of sp movement no one can predict. So as fundamentalist i will never be perterb about the one that got away.

ps. here is another one of your stocks that you would have lost on with your buy at $3.90. To me this is what i call brain dead.

AS i reiterate. this stock is too much of an unknown quantity to assess the fundamentals so why risk it. There are plenty of other stocks with more stability or certainty than this one.

[Phaedrus]

TEL has today broken above its trendline. This has happened once before (blue arrow) but without sufficient volume to break the OBV trendline too. You can see that this trendline break has sufficient volume to give an OBV confirmation (light green arrow).

For anyone wanting to get into TEL, this constitutes "Permission to Buy".

http://h1.ripway.com/Phaedrus/TEL422.gif

This was posted before the Close, which may, of course, be different. See how its all done with hindsight?

[Naylz]

Hi Phaedrus, im a total ignoramus when it comes to TA but a question about the above. Trying to learn.

Why dont you take the 4.10 peak as the top of the trendline? its still then an accelerating downtrend but not so steep? How does one choose which peak to use for the trend? Sorry if this is a silly question?

[Phaedrus]

You could draw a new, less steep unconfirmed trendline using the April peak if you wanted to, Naylz, - and it may yet come to that - but right now it is "wait and see" time for this stock.

TEL would need to break above $4.06 before we could say that the downtrend had ended and an uptrend begun.

TEL would need to break below $3.58 before we could say that the breakout had failed, but the ongoing downtrend had decelerated a little.

So long as TEL dithers between $3.58 and $4.06, it is perhaps best viewed as being in a trading range. The time to draw a new trendline is when TEL breaks above $4.06 or below $3.58.

[Major von Tempsky]

Read this http://edition.cnn.com/2008/BUSINESS/05/08/deutsche.telekom.ap/index.html

A few extracts....

FRANKFURT, Germany (AP) -- Europe's biggest telecom company Deutsche Telekom said Thursday that its first-quarter profit rose more than 33 percent as it reaped the benefit of selling its media and broadcast unit and booked lower interest expenses.
art.obermann.gi.jpg

Deutsche Telekom CEO Rene Obermann has presided over a successful first quarter of 2008.

The Bonn-based provider of landline, mobile phones and Internet access earned 750 million euros ($1.16 billion) in the January-March period, up 33.2 percent from the €563 million it earned a year earlier.

The figure included adjustments for special effects along with gains from the divestment of its media unit to France's TDF SA in January.

Without those adjustments, the company earned €924 million ($1.43 billion) in the quarter, compared with €459 million a year earlier.

Despite the increases, company revenue slipped 3.1 percent to about €15 billion ($23.14 billion) in the first three months of 2008, compared with €15.5 billion a year ago, and below the €15.1 billion ($23.3 billion) that analysts polled by Dow Jones Newswires had forecast.

[Steve]

Following the enforced separation of TEL, NZ has started its leap up the OECD broadband rankings...

NZ inches up OECD broadband rankings (http://www.stuff.co.nz/4554751a13.html)
New Zealand has climbed one place to 19th in the latest OECD broadband, or high-speed internet, rankings.

[Dr_Who]

TEL is a dog! I dont know why anyone would want to touch it.

VCT is laying high speed broadband cables and signed with Vodafone. Overseas trend is to make phone calls and download movies using high speed internet. You can download a movie in parts of Europe and Asia in only a couple of hours. One can use high speed net to make local and overseas calls and not need the phone lines. I have friends in Europe who calls me for only a few cents per minute sing the phone that is connected to the high speed broadband cable. This is only just one example.

WAKE UP!

[Hoop]

Tested during the slow time (night time) normally about 4300kb/sec. Doesn't take too long to download a good movie (1GB size DivX format) about 45 minutes. It's the data cap plan I have that sucks.
Streaming data is effortless no lags in buffering.
I'm 3.5km from the telephone exchange.
42% of the world are worse off than me.:)

Speedtest.net - The global Internet speed test for bandwidth throughput and VoIP performance (http://www.speedtest.net/index.php)

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Past Results Summary

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[kura]

Hoop, I just took the speedtest and am faster than 30% of country (early morning so would be even slower in day) which is much worse than your 66%
I see you are with ihug (now part of Vodaphone)
At the moment I have a standard xtra broadband connection, but had some guy knocking at my door from Vodaphone telling me about benefits of going over to them, (Phone & internet deal) cheaper prices, plus a few extra bits thrown in, I am in the "thinking about it" stage, would you recommend it ?

[foodee]

Off topic slightly, but hoping someone could help.

Owing to evolving life activities I intend to change to mobile broadband.
My limited observation is that in less populated area Vodafone coverage
is not as extensive as Telecom. Comments and suggestions appreciated.

TIA

cheers

[BDLBOM]

hehe

you can WATCH movies now instantly for free via net - what do you mean a "couple of hours" - maybe I didnt get your drift, either that or you are a dinosaur

I thought Dr Who was so much more advanced - GEE I can phone my mates via the net - LOL - so last year

Ok I give in, educate me, what does LOL stand for?

[777]

Laugh out Loud.

L O L

It's all text speak. Another language in it's self.

[Hoop]

Hoop, I just took the speedtest and am faster than 30% of country (early morning so would be even slower in day) which is much worse than your 66%
I see you are with ihug (now part of Vodaphone)
At the moment I have a standard xtra broadband connection, but had some guy knocking at my door from Vodaphone telling me about benefits of going over to them, (Phone & internet deal) cheaper prices, plus a few extra bits thrown in, I am in the "thinking about it" stage, would you recommend it ?

Kura I would check out the wiring around your house first, before switching providers.
I was swearing and cursing Ihug for my drop in speed after switching to broadband. They promised 4.3mb/sec but my original speed test showed 1.3 and sometimes it dropped to below dial up speed 0.3.

My friends told me it is Ihug.. others said I had too many jackpoints (8)... others said its Telecoms old copper wires and it's typical 3rd world country status that the monopolist Telecom has dragged us too ...blah ..blah.

But I rang Ihug customer services anyway.... Ihug customer service was dreadful when I rang. I have a suspicion the service is outsourced to an Asian country..after 20 minutes hanging off the end of the phone my call was finally answered by a person whose English was hard to understand combined with a sub quality connection. On the positive side I must admit they were efficient and within 24 hrs a Telecom van arrived to fix the problem...yes Telecom :cool:.:).

My problem was Mrs Hoop's computer modem in her outside work room still hooked up to the phoneline jack. We unhooked the modem cable from the jackpoint and voila!!! 1.3 turned to 4.3mb/sec
It cost me $120 for the call out, because I am with Ihug and do not pay telecom a wire maintenance fee anymore, but hey!! it was worth it as my frustration with slow broadband disappeared.

Note : (Telecom testing the Telephone line for broadband speed and detecting/fixing faults at the roadside terminal is free of charge to anyone)

From talking to the Telecom linesmen they say my experience mentioned above is apparantly very common.

Many people with drop outs and slow connections blame their provider and Telecom is the whipping boy at the moment. It is very easy to blame the teleco that is out of favour with the public, but some of the time it could be the substandard performance from the wiring, faulty jackpoints, or a faulty appliance hooked up to the jackpoint within your house that is causing the problem.
I suspect Dr Who should check this out.

Kura

Before ringing Telecom for assistance try removing all connections to your pointpoints except the ADSL jackpoint to your router and then do the speed test again. If it has improved significantly plug back in one at a time each connection until the culprit is found. One common culprit is a faulty Sky connection. Very seldom it may be your router (customer services will guide you through a reset over the phone if need be).

If no improvement ring your provider for assistence they do a check as you speak to see if your line has a fault and they tell you right away over the phone. If there is no fault then it is your provider problem and a change of provider may help perhaps Vodafones Ihug (no caps limits for sky movies downloads:D). As you are with Telecom I assume you pay a small wire maintenance fee therefore to check and fix the problem is free of charge.

Also of interest ... the exchange your phone is linked to, powers down your line is it detects a fault. Sometimes a technician will reset your exchange connection and everything is sweet, but if the unlying problem (fault) is not fixed the exchange may power down your line again and your problem returns.

Other points of reference I learn't from talking to the telecom linesmen.

**Distance from an exchange affects speed, the further away the lower the speed.
**The age of your property, it may have a very old copperwire connection leading to your house.
**Most copper wire connections have enough wires for 3 separate telephone numbers, check that your exchange has only your number(s) and not a disused number that is still active (a linesmen should check this out for you). This you may not be aware of as the previous house owner may have had several different phone numbers. If your fax has a different number and runs off the main jackpoint disconnect the fax before speed testing.

Kura and others ...Telecom broadband may not be as bad as you thought....then again........:confused:

Best of luck
Hoop

[whirly]

ISP = Slingshot

Living in Greymouth with old copper wires and rats and rain eroding my connection.

Speed results show me better off than 79% of NZ and 86% of the world. Another good reason to move West.

[Dr_Who]

hehe

you can WATCH movies now instantly for free via net - what do you mean a "couple of hours" - maybe I didnt get your drift, either that or you are a dinosaur

I thought Dr Who was so much more advanced - GEE I can phone my mates via the net - LOL - so last year

What I mean to say is that the phones in parts of Europe are connected directly to the broadband cables and you can make overseas and mobile calls at a very cheap rate, while still crystal clear.

Currently in NZ you have dont have that available. You have to boot up the computer and use Skype, MSN etc which is not very clear and have a lag.

[Major von Tempsky]

So, TEL closes at $4.02 today.
In other words TEL has been rerated upwards relative to the rest of the market which has gone back. While most other stocks have declined TEL has bounced back.
As the stock with the highest sustainable yield on the NZX I predict there's rather more upside yet.
19 finance companies down the tube to date and none of them anywhere near competed with TEL on gross yield.

Savvy sharemarket investors took good care to keep clear of people like Petricevic after 1987 and anyone who regularly read their business pages would have stayed clear of finance companies.

[craic]

Agree. I hear friends who have a little money to invest telling me some of the deals they are offered and I cringe. I now have something in excess of 18,000 Tel shares ( I can never keep up with the shares-for-dividend count) and it is the backbone of my portfolio - I don't even have problems with speed or service. It would be nice to know how many of the telecom detractors are in fact disguised competitors

[Snoopy]

So, TEL closes at $4.02 today.
In other words TEL has been rerated upwards relative to the rest of the market which has gone back. While most other stocks have declined TEL has bounced back.
As the stock with the highest sustainable yield on the NZX I predict there's rather more upside yet.


'Vindicated' when the TEL price is $4.02? Try $5.02 Major and I might agree with you! There has been a lot of hot air written about Telecom. Some of it for political mileage. Some of it from competitors for their own commercial gain. However, I always judge people, and in particular company spokespeople, by what they do. Not by what they say.

As the dust starts to settle Orcon, now a government subsidiary, is putting some of their equipment into Telecom's cabinets in Auckland. Both major political parties are talking about initiatives to bring fibre to the home. While Telecom is busying itself with getting fibre to the cabinet. (Apologies to other small scale players whom I have left out). But on a national basis what we have is 'the government' and 'Telecom'. The 'old gang' has cleared out of Telecom at senior management level. New CEO Paul Reynolds has got his head down quietly working away doing what he did for BT in the UK.

There must be some doubt as to whether the 'build it and they will come' strategy will be successful. And I expect some share price volatility as a result of that doubt. Telecom do not always get it right and, it must be said, neither do their competitors. But I think it is time to cut the vitriol and let Telecom 'play their hand', and see what happens. I predict there will be more ups and downs along the way, and no I'm not sure the current level of dividend is safe *next* year. But one thing I am sure about. When the smoke finally clears the government, be it National or Labour lead, will still be there and Telecom will still be there. And I will still be there on the Telecom share register, having pocketed some nicely above term deposit rate dividends along the way. Anything else on the way to that fully deregulated picture will more than likely be market noise. And yes I am prepared to buy more TEL shares myself should the market noise get silly enough.

SNOOPY

discl: hold TEL

[Yossarian]

down 19c so far today!

Maybe this was just one of those mysterious month end spikes?

[Major von Tempsky]

Up 11c so far today.

The unfortunate thing is that TEL is not priced on its fundamentals and most of its shareholders live overseas.
As its about the only NZ share that overseas players are interested in because of being able to get reasonable size parcels without substantially altering the price and ditto for selling them they use it to invest in the NZ dollar and get a dividend return.
Currency movements cause movements in TEL quite unrelated to its fundamentals. And not just currency movements - any sort of financial development overseas can cause overseas players to bale out for practically any price at a moment's notice.

All this leaves rich pickings for NZ value investors :-)

[Deev8]

... While Telecom is busying itself with getting fibre to the cabinet.That's something that I have received a benefit from. Telecom recently made a dramatic reduction in the length of copper wire between my home and the exchange by installing fibre to a nearby roadside cabinet. The result was that my 'typical' download speed improved from just over 1 Mbps to around 4 Mbps.

[Dr_Who]

There will be two main players in the broadband wholesale side. TEL and VCT. I prefer VCT. :)

[Steve]

There will be two main players in the broadband wholesale side. TEL and VCT. I prefer VCT. :)

Why is that?

[BDLBOM]

There will be two main players in the broadband wholesale side. TEL and VCT. I prefer VCT. :)

I have built up my VCT holding partly in that expectation too, Especially in the Auckland region.

Don't underestimate TEL though, they will be resourceful and will compete.

[Steve]

There will be two main players in the broadband wholesale side. TEL and VCT. I prefer VCT. :)

Will Vodafone not be a major player?

Vodafone launches new broadband network (http://www.nzherald.co.nz/section/story.cfm?c_id=5&objectid=10514815)
Broadband competition in New Zealand has heated up, with Vodafone today introducing its new, high-speed 'Red' network.

[BDLBOM]

Will Vodafone not be a major player?

Vodafone launches new broadband network (http://www.nzherald.co.nz/section/story.cfm?c_id=5&objectid=10514815)
Broadband competition in New Zealand has heated up, with Vodafone today introducing its new, high-speed 'Red' network.

Doesn't Vodaphone have a deal with vector?

[Deev8]

There will be two main players in the broadband wholesale side. TEL and VCT. I prefer VCT. :)


Will Vodafone not be a major player?Vodafone won't be a player in the wholesale market anytime soon because they don't own a fixed line network.

At some point in the future they may have a significant mobile broadband wholesale business though.

[duncan macgregor]

What will happen to future returns for TEL shareholders?

Probably like what has happened .... Total Shareholder Returns (from Aspect Huntley) have been -

1 year -15%pa
3 years +3%pa
5 years +2%pa
10 years +5%pa

Thats been calculated assuming all dividends have been reinvested ..... meaning you haven't been able to live of the divies if you wanted the above returns .... long term returns than putting your money in the bank

And thinking that more than $8 billion is currently 'invested' in TEL it is unbelievable .... although the past is no guide to the future you have to wonder what will turn make TEL a good investment over the next 10 years.

Such low returns surprising? not if you have been following Phaedrus's charts for the last 5 years or so Interesting figures from the past i wonder what this years figures will do to to that set of figures?. I once was proved wrong when i said TEL would hit $3 before it hit $5 and that it was a downtrending dog. It did hit $5 but now at $3-28 my prediction is coming right. This is a great chance for the averaging down brigade to snap them up. Macdunk

[Deev8]

... i said TEL would hit $3 before it hit $5 and that it was a downtrending dog. It did hit $5 but now at $3-28 my prediction is coming right.A promising career as a government spin doctor awaits.

Made a prediction that the price would drop to $3 before it got to $5. Since then it actually did climb to $5, and although it's since fallen it hasn't dropped as low as $3 yet, somehow the "prediction is coming right".

Stay tuned for more ... petrol has never been more affordable? property prices are rocketing? we've never had it so good!

[Enumerate]

It would be a brave call to claim that TEL.NZX at a P/E under 3 and a dividend yield of about 13% in a bear market wasn't a good investment.

Even the full brunt of government irrationality in terms of communications market regulation cannot blunt this level of value.

If I wasn't up to the gunwales in US senior corporate loans ... I would have to be in, big time.

Start buying ... if you are lucky, they will get cheaper.

[Steve]

It would be a brave call to claim that TEL.NZX at a P/E under 3 and a dividend yield of about 13% in a bear market wasn't a good investment.

Even the full brunt of government irrationality in terms of communications market regulation cannot blunt this level of value.

If I wasn't up to the gunwales in US senior corporate loans ... I would have to be in, big time.

Start buying ... if you are lucky, they will get cheaper.

Do you think a change in Government in November will cause a signifiant jump in the shareprice?

[Snoopy]

It would be a brave call to claim that TEL.NZX at a P/E under 3 and a dividend yield of about 13% in a bear market wasn't a good investment.


Enumerate, the P/E is only under three because last year Telecom booked a huge profit from the sale of the Yellow Pages Group. That cannot and will not be repeated. Want to work out the forward looking P/E? If we go back to what I posted on this thread on 26th March 2008

----------

Telecom are currently projecting net earnings for the full year of $700m-$730m. Amortization for the first six months of the year was $90m (boosted by the Powertel purchase). Double that to make a year and I get an annual amortisation of $180m. The 'taxation effect' means the equivalent extra in net profit is $121m. Add that to the lower bound profit forecast of $700m and I get $821m.

75% of $821m= $616m. Based on 1.824m shares outstanding (reduced as a result of the capital return) I get a dividend of 34cps. With 21cps paid in the first three quarters, that leaves a fourth quarter payment of 13cps. At a share price of $3.82, Telecom are trading on a gross yield of 13.3%.

-----------

$700m on 1,824m shares represents earnings per share of 38.4c. At a share price of $3.41, Telecom is on a forward P/E of $3.41/0.384 = 8.9.

If my above earnings prediction is correct, we are looking at a forward dividend yield of :

(13c+6c+6c+6c)/$3.41= 13.6% (gross) [based on 33% tax].

SNOOPY

discl: hold TEL

[Major von Tempsky]

Is the sell at any price desperate overseas TEL holders who have a majority of the TEL shares.
Once those lemmings have gone rational analysis of TEL will be possible again.

Does 2 days of DOW rises signal a return to sanity and stability or is it a dead cat bounce before more lemmings run over the cliff...

[Snoopy]

Which if your calcs and assumptions of future earning are within coo-ie, Snoopy, ... makes TEL a classic bear market buy. I.e. buy long, ignore shareprice and invest the divies in whatever takes your fancy and wait for the yeild to drive the market price back up.


I haven't made any assumptions about future earnings Belgarian. Telecom have not revised their earlier forecast as they would be required to if the FY2008 was going to be materially different. And Telecom's FY2008 ended on 30th June 2008 (last week).

Telecom have already declared their dividend policy for FY2009 is to pay 6c per share per quarter for the first three quarters, regardless of actual FY2009 earnings (which Telecom themselves are yet to forecast).



However, it the future earnings bit that has everyone spooked. A few months ago many brokers were touting TEL as either a strong buy, moderate buy or hold. Now the reverse is true. Personally I can't make my mind up.


When the last rats have left the Telecom share register and demand and interest in the share has dropped to an all time low, then *that* is the time to buy. I guess that time is approaching, if it is not already here. I would rate NZ brokers lack of interest in TEL as an excellent contraindicator.



Note that the Teachers Fund in Canada has just picked up 'Bell Canada' with a leveraged buyout. IMNSHO ... were it not for some of the regulatory bagage that TEL is strapped with, TEL would be a similar play - it still might be.


I think there is a 10% cap on any single shareholder in Telecom. If you want more you have to get NZ government approval. That would preclude any buyout like you have seen in Canada. I would be interested to find out some more about the terms of that Canadian deal. In what part of the Canadian telecommunications market are 'Bell Canada' participants? And how leveraged is leveraged? I would have thought buying into a company with technology risk like telecommunications using high leverage was quite a risky investment proposition.

From memory the 10% share cap is tied up in the 'Kiwishare' arrangement that Telecom has with the NZ government. Perhaps someone with a better memory than me can clarify?

SNOOPY

[duncan macgregor]

Is the sell at any price desperate overseas TEL holders who have a majority of the TEL shares.
Once those lemmings have gone rational analysis of TEL will be possible again.

Does 2 days of DOW rises signal a return to sanity and stability or is it a dead cat bounce before more lemmings run over the cliff... Major, How can you expect rational analysis in an irrational market?. The market takes irrational swings as the blue eyed brigade fight it out with the lemmings. TEL or any other company will seldom trade at a rational level by taking last years PE level and guessing next years expected level.
The traders sell to the blue eyed brigade and buy from the lemmings.
If you stand back and watch the battle rage understanding the rules of how the market works its dead easy to keep winning. Thats why traders exploit your weakness coming out on the top of the market, leaving you scratcxhing your head working out PE ratioes. Macdunk

[Hoop]

Vodafone won't be a player in the wholesale market anytime soon because they don't own a fixed line network.

At some point in the future they may have a significant mobile broadband wholesale business though.

Vodafone Ha!!! :p:p Telecom Shareholders have nothing to worry about competing with Vodafone.
As I am writing this post I am holding this phone to my ear
BEEN HOLDING ON TO FOR 65 MINUTES !!!! trying to communicate with Vodafone customer services ...:mad::mad::mad::mad::mad::mad::mad::mad:
Vodafone have finally remove the ihug brand as of today.

So...................a great start for me an ex ihug phone + internet customer.........My broadband speed has gone from 4233 to 74kB/s...my 3rd problem in 2 months and every
time I have hung up losing patience...can't even email the buggers......they are incommunicable!!!

Vodafone I am going to spread the word how bad you people are....your service is worse than telecom and that is saying something!!!

Now been 75 minutes:mad::mad::mad::mad:

[Hoop]

7.40pm 82 minutes.......yeahhhh the autmatomated "sorry we can answer yur call straight away" message and the crappy music has stopped and my call is ringing though :D yeahhh at long last

7.41pm still ringing ..no one has answered yet :D:)
7.42 still ringing :confused:
7.43 still ringing :confused:
7.45 still ringing come-on answer the &^%$ thing:confused::(
7.48 :(
7.50 :(:mad:
7.53 still ringing ..I don't think anyone is going to answer this:(
7.55 :mad: Now Mrs Hoop is nagging at me:p
7.57 Have to get ready..going out,Mrs Hoop telling me to hurry up:(
8.00 no one is answering this 102 minutes wasted!!!:( HUNG UP the phone 3rd time now:mad:

Good News for Telecom shareholders...Vodafone going to lose a customer and I am going to tell the whole wide world why:mad:

[Soolaimon]

Good one Hoop. More of us should folllow you. I call Telecom often and have nearly always had good and reasonable service from them. They deserve our (Kiwi) patronage.

[kura]

Yep, I used to think Vodafone was a company that had it's act together, I was approached by a Vodafone salesman some 3...4 months ago to switch over from Telecom, (switch was for phone, internet, the lot, a total package) yes they offered a nice sounding deal, so I said OK, since then, I have heard absolutely nothing from them.

I'm in central Auckland, (supposed to have had some recent super duper type exchange enhancements or something) (or so the Vodafone sales guy said ), but no, I think I will just stick to TEL.

[duncan macgregor]

What most of you miss is the reason that we are here on this site discussing this in the first place. The reason that i am here is to invest in companies where the sp plus dividends will make me a decent return on my investment. To invest in any company caught in a long down trend is the path to financial ruin, which a lot of you fail to comprehend. Who cares if they hold the country back or not, or if they are a bunch of rotten cheating bastards. I leave that to the people in charge to sort that out, it is not my concern.
My only concern is my investments, nothing or no one else matters when i do this. If some of you lot thought a bit more like that, you wouldnt be caught holding a dog like this bleating about rights and wrongs.
macdunk Thats what i said last year when arguing the point with SNOOPY. I also said TEL would downtrend below $3. Today its $3-20 tracking south with very limited prospects of even going side ways. Macdunk

[Crypto Crude]

yes,
good call mackdunk...
did you see this as a market issue, or company related which would lead to a down turn?
:cool:
.^sc

[duncan macgregor]

yes,
good call mackdunk...
did you see this as a market issue, or company related which would lead to a down turn?
:cool:
.^sc SHREWDY at that time it was a company issue with increasing competition and an overpriced NZD. Today with a downtrending dollar, and a market heading for a crash its prospects for a reversal in trend are non existant. Macdunk

[duncan macgregor]

What most of you miss is the reason that we are here on this site discussing this in the first place. The reason that i am here is to invest in companies where the sp plus dividends will make me a decent return on my investment. To invest in any company caught in a long down trend is the path to financial ruin, which a lot of you fail to comprehend. Who cares if they hold the country back or not, or if they are a bunch of rotten cheating bastards. I leave that to the people in charge to sort that out, it is not my concern.
My only concern is my investments, nothing or no one else matters when i do this. If some of you lot thought a bit more like that, you wouldnt be caught holding a dog like this bleating about rights and wrongs.
macdunk Thats what i said a couple of years ago debating the point with people to blind to reality to realize that investing is only about making money. I also said the share price would drop to under $3-00 which with only 14c left to go its nearly there. Macdunk

[Snoopy]

Thats what i said a couple of years ago debating the point with people to blind to reality to realize that investing is only about making money. I also said the share price would drop to under $3-00 which with only 14c left to go its nearly there. Macdunk

FIM, IIRC you said the TEL share price would go to $3 before it went to $5 and you were proved wrong.

You are also wrong about the 14c to go, because there has been a capital restructuring in the form of a share cancellation since you made your prediction. For every nine shares we shareholders owned back then we now have eight shares plus $4.88. So to get to $3 each of the shares we have left must drop an additional $4.88/8 = 61c. That means the TEL share price would have to decline to $3.00-0.61= $2.39 for your prediction to come true. And I'm not even counting dividends!

It was interesting to hear that Telecom had suspended their bonus share in lieu of dividend plan for the final dividend of 8c due to be paid soon. Bruce Sheppard of the Shareholders Association was on the radio saying that the Telecom board were effectively refusing to issue any new shares because they thought the share price they would have to issue them at (near the current market price) too low. Furthermore Bruce said that the fact Telecom were not having a buyback meant that even though the share price was low, the company would make more money by investing their cashflow within the existing business, instead of using that money to buy back their own shares on market.

I am not sure if I follow Bruce's argument. I am not a member of the Telecom shares instead of dividends scheme. But my impression was that Telecom would ostensibly 'save' capital by not paying participating shareholders a cash dividend, by issuing participating shareholders a cash equivalent number of shares. But then Telecom would take that cash saved and use it to buy Telecom shares on market to exactly cancel out the number of new shares issued under the plan. IOW the whole scheme is effectively cash neutral. But maybe I have it wrong. Perhaps someone who is in the scheme can clarify?

I do know that Telecom are looking at accelerating the roll out of their new mobile phone network. It looks like they have all but admitted that CDMA was a huge, and now costly, mistake. Of course these things are always 'obvious' with hindsight.

SNOOPY

discl: hold TEL

[duncan macgregor]

SNOOPY you are quite right i did say TEL would go down to $3-00 before it hit $5-00. The real point is where will it get to next in its spiral to the bottom or where will the bottom be?.
Remember when the sp was over $9-00 today its just north of $3-00 in an ever worsening market position. Thats not a very good record coming out from a bull market where most shares doubled in price.
TEL prospects have never looked worse looking forward fundamentaly than they do today. I now think the downtrend will continue now that the market is in its self go into a steeper down trend. Macdunk

[macduffy]

Whatever the arithmetic, Macdunk was right in his view on TEL. I also decided some time ago that if the govt was going to confiscate value from the company without compensating shareholders then I would get out and let them get on with it.
Wish I'd done the same with my AIA!

:(

[warthog]

IOW the whole scheme is effectively cash neutral.Market fluctuations, brokerage, and tax.


I do know that Telecom are looking at accelerating the roll out of their new mobile phone network.{/quote]
They have been for some time now. Panic is an understatement.
[quote]It looks like they have all but admitted that CDMA was a huge, and now costly, mistake.
They don't need to admit it - everybody knows it.
Of course these things are always 'obvious' with hindsight.

No, it was obvious when they made the wrong decision.

Disc: no TEL.

[Snoopy]

At the same time as it gave back 61c per share, it cancelled one nineth of the shares on issue, so, technically, the share price should not have been affected.
hiawatha

That is correct Hiawatha, provided the TEL share price on the day of cancellation was 8x61c=$4.88. IIRC it was not (quite). But largely what happened on that share cancellation day is superflous to Macdunks 'prophecy'. Macdunks claim was not that the share price would sink to $3 on the day of the share cancellation, but that it would sink to $3 eventually.

Let's say a shareholder held nine TEL shares on the day that Macdunk made his claim. Macdunks claim was that all nine of those shares would one day fall to $3 in price. However one of those nine shares was shortly afterwards valued by Telecom at $4.88, cancelled by Telecom at $4.88 and this money was returned to the shareholder. So that particular share can never fall in value to $3 because that particular share 'died' at $4.88 and was handed back to shareholders at that price.

So what does that do to Macdunks prophecy? It means that the remaining eight shares must fall more in value than falling to $3 to make up for the 'dead' share that can no longer fall in value. The extra dollar amount that the remaining shares must fall is $4.88-$3=$1.88, spread among those eight shares. So each of those remaining eight shares must fall an extra 23.5c (8 x 23.5c= $1.88) which mean they must fall to $3.00-23.5c=$2.765 if Macdunks original prophecy is to be fulfilled.

Hopefully this makes things clear. My first calculation where I claimed the remaining TEL shares needed to fall to $2.39 was wrong :-(.

SNOOPY

[Snoopy]

Snoopy wrote:
"IOW the whole (dividend reinvestment) scheme is effectively cash neutral."

Market fluctuations, brokerage, and tax.


Do Telecom shareholders who receive shares at a discount to market price if they take shares in lieu of dividends? If so and Telecom has to buy back those same shares at market price then the Muddy one has a point. Telecom are effectively destroying capital that they might be better able to employ elsewhere (albeit only a small amount) by running a scheme like this.

And yes Telecom are wasting more money on paying brokerage (even though you can bet they will have negotiated a brokerage rate that is less than you or I might pay). However, from a shareholder perspective, the shareholder is saving brokerage because they aren't paying any brokerage on the new shares that Telecom is issuing to them. And I would argue that shareholders wanting bonus shares in lieu of dividends would be willing to pay a slightly higher price for those quyalifying (cum dividend) shares to reflect the cheap shares they are about to get. This makes the cum dividend share price higher and thus the schemes extra brokerage is effectively arbitraged away.

Tax? Why is that an issue if Telecom have to pay tax via their imputation credit account whether or not they issue dividends as shares or cash?



Snoopy wrote:
"It looks like they have all but admitted that CDMA was a huge, and now costly, mistake."

They don't need to admit it - everybody knows it.


Let me ask you just what is wrong with CDMA Warthog? IMO the main problem of late is that Telstra have turned off their CDMA network in Australia. Also IIRC it has never been able to 'roam' in Europe. But then how many NZ mobile phone ever needed to use their phone to roam in Europe? I would argue not many.

No, the main problem with CDMA *now* is that Australia no longer uses it. When CDMA was adopted in NZ, I don't think there was any way to predict that would happen. Sometimes it becomes wise to change your business strategy in response to what other market players do. The fact that other market players choose to go in a different direction at some time in the future *does not* make Telecoms original decision to adopt CDMA wrong (without the benefit of hindsight). Technically there is nothing that a CDMA system can't do that gives it a disadvantage over the Vodaphone system, is there?

SNOOPY

[Contrarian]

Gidday Snoopy
Usually DRIPs are issued on the basis of the average cum price over a week or so before the record date,LESS the amount of the imminent dividend,LESS discount if any.

I grab every DRIP I can.

[peat]

Also IIRC it has never been able to 'roam' in Europe. But then how many NZ mobile phone ever needed to use their phone to roam in Europe? I would argue not many.
SNOOPY
woah hang on there... i reckon this is a huge factor in deciding between them or Voda.

[GTM 3442]

Global roaming keeps me firmly in the Vodafone camp.

I go overseas and it --- just ---- works. Nothing to set up, nobody to contact, nothing to arrange.

Why would I want a Telecom phone with all the attendant hassle ?

[moimoi]

snoop,

I think you'll also find that another major attraction, particularly to the MTV generation, is that with Voda you operate via a sim card. This allows you to sparkle yourself with a new phone regularly as you just swap the card over.

With telecom, your stuck with a lame range of phones, and then stuck with it for a long period of time. This is because they backed the wrong horse in the form of CDMA.

cheers
Moi

[Snoopy]

I think you'll also find that another major attraction, particularly to the MTV generation, is that with Voda you operate via a sim card. This allows you to sparkle yourself with a new phone regularly as you just swap the card over.

With telecom, your stuck with a lame range of phones, and then stuck with it for a long period of time. This is because they backed the wrong horse in the form of CDMA.


What are you saying Moi? You have all your details on a plastic card then just stick it into another phone and it all works for you? What about your address book, or 'gasp' saved messages (yes some people do keep 'em.) Do those go onto your Sim card too?

CDMA means 'Code Division Multiple Access' whereas GSM means 'Global Service for Mobile Communications' (see I know how to look up the glossary in my Telecom annual report - how hi-tech is that!). But why can one type of network operate using a Sim card and one not?

SNOOPY

PS GTM 3442 and peat..... I appreciate that for you two, the ability to roam to Europe is a factor for you and even the clincher in going with Vodaphone. However, I am not sure you two are typical of the demographic users of mobile phones in NZ. Nor would users of this site be a representative sample. What I'm saying is that *most* people do not jet off to Europe and back all the time. So not being able to roam there has not been an issue for most.

[moimoi]

[QUOTE=Snoopy;222278]What are you saying Moi? You have all your details on a plastic card then just stick it into another phone and it all works for you? What about your address book, or 'gasp' saved messages (yes some people do keep 'em.) Do those go onto your Sim card too?

Snoopy,

As far as i know thats exactly what occurs....photo's and address books etc are held on the SIM card, allowing easy swapping of phones when the next sparkly one comes along.

As a result i suspect that telecom has bugger all of the under 35's mobile market, who will be around longer to spend more as opposed to those with a minor tinge of grey! ;-)

cheers
Moi

[The GrandMaster]

Also consider all the NZers coming home from their OE in London with their flash mobiles (usually generation or 2 ahead of what we have in NZ) that are practically given to you by UK mobile companies wanted to get your business. All those mobiles are SIM-card based.

For those NZers who want to keep using their favourite phone, Vodafone is always going to be preferred.

[Deev8]

IMO the main problem of late is that Telstra have turned off their CDMA network in Australia. Also IIRC it has never been able to 'roam' in Europe. But then how many NZ mobile phone ever needed to use their phone to roam in Europe? I would argue not many.International roaming is the factor that persuaded me to ditch my Telecom mobile in favour of Vodafone.

[Dubdee]

Whilst I just had my GSM phone working fine roaming in Russia I got bombarded with messages encouraging me to use it at only NZ$5.00 per minute plus local charges. Just strolled into a local russian phone shop bought a new sim card and then I had a "russian" MOB to use for a fraction of the call cost.

[Zaphod]

International roaming is the factor that persuaded me to ditch my Telecom mobile in favour of Vodafone.

We as a company, made a concious decision to convert our existing Telecom handsets to Vodafone handsets, primarily because of this exact roaming issue. This occurred despite the higher per minute calling charges we would be forced to pay.

Now that Telecom are selling hybrid tri-band GSM/CDMA phones, the discounted calling rates (and the lousy Vodafone customer service we've received) means that we are very likely to convert back in the next few months.

[Zaphod]

Whilst I just had my GSM phone working fine roaming in Russia I got bombarded with messages encouraging me to use it at only NZ$5.00 per minute plus local charges. Just strolled into a local russian phone shop bought a new sim card and then I had a "russian" MOB to use for a fraction of the call cost.

I've personally done this a few times when overseas on holiday, however it's not always practical when on business, especially when it's the board of directors that are overseas :(