TEL (Telecom NZ Ltd) [Archive]

stevieb

08-05-2006, 01:30 PM

Well, I for one think that AAPT provides a pretty solid warning to those who think that the smaller Telco's have just been handed a money spinner here.

That was the thinking when AAPT was bought, deregulation of the market in Oz would open opportunities for smaller Telco's, haven't in reality seen much of that in action. So I agree with whatsup. While there undoubtedly are any number of competitors to Telstra it's still Telstra getting the lions share of broadband connections!

Secondly ULL is not the provider of the fast internet solution some people seem to think, if you do a bit of research on the bueeltin boards that have been provided by posters you will see that the market in Aus/UK has realised that ULL will not be the saviour for FAST brodband. It may well get more people on broadband but it won't be fast!

ananda77

08-05-2006, 02:06 PM

...the reasons why Telecom will not sell the Aussie Mobile Unit and cut dividends substantially in the near future escape me...

Gryffyn

08-05-2006, 02:28 PM

quote:Originally posted by Halebop

quote:Originally posted by Gryffyn

Just watch for VoIP to be de-prioritised at the exchanges.

Assuming the unbundled loop is just a "dumb" network this shouldn't happen. Even if TEL wanted to their competitors certainly wouldn't be blocking Skype ports.

As an aside, I've had heaps of problems with sound quality and connectivity on Skype the last 2 or 3 weeks. I've wondered if TEL were doing this right now.

:-)

PLK

08-05-2006, 03:21 PM

come on people
keep on talking down TEL share price
i want to buy back the TEL share I sold at 4.83 at lower price

disc bought at 4.73 sold at 4.83

beacon

09-05-2006, 04:32 PM

Risky game PLK. Be careful.

PLK

09-05-2006, 06:18 PM

ya thanks i know
i will watch it very closely

port hills

10-05-2006, 11:17 AM

quote:Originally posted by PLK

come on people
keep on talking down TEL share price
i want to buy back the TEL share I sold at 4.83 at lower price

disc bought at 4.73 sold at 4.83

You back in yet?

winner69

05-06-2006, 01:24 PM

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

duncan macgregor

05-06-2006, 01:42 PM

WINNER69, One little point that you missed out in your sums is the rise and fall in the dollar. TEL have had a lot of overseas investors buying in to a rising dollar then selling out at the top. I think other than that anyone caught holding this arrogant dog deserves very little sympathy. I think big changes at the top will come to late to save TEL which will continue to downtrend. macdunk

Animeart

01-07-2006, 04:23 PM

Unless they get rid of TG and put in some fresh blood of course. I for one have no faith in this company after news of their arrogant tactics. Time for Telecom to eat humble pie, like AT & T back in the 70/80s.

tsb

01-07-2006, 05:22 PM

their 31/05/06 buy back announcment was for it to continue for a period not exceeding 6 weeks.

i.e up to the full moon on 11/07/06. Presumably they have been holding the price up above $4.00, if still buying.

on this basis the end of the second week in july should show a clearer picture

GuzzBear

01-07-2006, 08:01 PM

http://www.fool.com/news/commentary/2006/commentary06063010.htm?source

Snoopy

01-07-2006, 09:00 PM

quote:Originally posted by winner69

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

There is an old saying that past returns are not necessarily indicative of future returns. IMO that was never more true than here. The goverment has not only changed the rules, but the game.

There is no point in reading up on the old rules of 'Monopoly' if the new game is 'Scrabble' (note: both games carefully selected to make rather a good analogy I think!)

So what can we do for predictive purposes? We could go to an unnamed chartist who was quoted as saying that the next resistance level is $3.80 and if that doesn't hold the price will crash to $3 like some newspapers did. The fact that these newspapers never even identified who this chartist was, I think speaks volumes for the credibility of that view.

Personally I think we need to look towards British Telecom (BT), which our government seems to have selected as the pin up boy of how things should be done. Local loop unbundling 'over there' happened five years ago. So all we have to do is look at what happened then and how things have panned out in the ensuing five years ;-P That IMO is the best indicator we have got as to what is going to happen. But it is far from that simple.

BT has been through some turbulent times over the last five years. Including a massive global expansion of which the old English Emperors would have been incredibly proud. And an equally fast and furious pullback when the company almost disappeared under the associated weight of debt. Thus any such analysis of the fundamentals of BT has to be adjusted for all of these extraneous events. I am a (very small) shareholder of BT, and I have a full set of accounts going back many years. That means that I am the ideal person to attempt such an exercise. Over the last month to six weeks, on and off, I have been attempting to do just that.

I have to admit, with the benefit of hindsight, I may have bitten off more than I can chew. However, following the advice of someone in my distant past who had a philosophy of biting off more than you can chew, and then starting to chew, I can see an end in sight. I intend to publish my results on the other channel, hopefully this coming week, so keep an eye out for that.

In the meantime I will stick to my position that I don't know what is going to happen. Actually in truth I think that is everyone's position. Except that I am one of the few that admit it.

SNOOPY

discl: hold TEL, BT

pimpit

01-07-2006, 11:26 PM

TEL needs business model, possibly a non monopoly smarter model .

pimpit

01-07-2006, 11:27 PM

why you care anyway? you want to make money not change world.

Snoopy

01-07-2006, 11:47 PM

quote:Originally posted by hiawatha

It may be a good analogy. I don't know. Seems a little opaque.
hiawatha

Perhaps my analogy is a little obtuse, so here is my explanation.

In 'Monopoly' the objective of the game is to whip your competitors into submission and ultimately bankrupt them all. The other players are your enemies. Co-existance can never be an objective. This is the old Telecom.

In 'Scrabble' your task is to build on a pattern of characters that exist. It is not always clear whether you have a 'good hand' or not. What you can do with your tiles depends equally on what your competitors have done with theirs. Your competitors can help you or hinder you, depending on how the game unfolds. Winning doesn't depend on destroying your competitors. It depends on how you can adapt to the game, and make the best of each situation. IMO this is much more akin to the position that Telecom finds itself in now.

Make sense?

SNOOPY

warthog

02-07-2006, 10:30 AM

quote:Originally posted by Snoopy

In the meantime I will stick to my position that I don't know what is going to happen. Actually in truth I think that is everyone's position. Except that I am one of the few that admit it.

Here's the warthog's take:

1. TEL will test the government's resolve - more carefully this time - so as to gain the most from a situation whereby they will attempt to establish exactly how much they need to do to ensure that the government don't start forcing TEL to do this or that.

2. At the same time, they will "consult" the industry so as to "tick" that box for the government.

3. TEL won't separate retain from infrastructure totally - as in separate companies - but will attempt to gain as much control as possible over both operations.

4. The premium build into the TEL shareprice will - as will revenues and proofit - continue to erode as it becomes clear that their businesses - or businesses - will take some time to get their collective heads around the new market. On the basis of sheer momentum, there will be no collapse, as an established relationship, however tenuous, with hundreds of thousands of customers is a huge assset.

5. TEL management will change, putting a new face on the old dinosaur. "A Fresh Start", the market will be told.

Snoopy, you have a holding in BT - you should be familiar with what will happen, or what is likely to happen. The only wildcard in the TEL case is the government: it's impossible to tell how strong their resolve is in terms of how far they are prepared to regulate in order to achieve an "acceptably" competitive market.

duncan macgregor

02-07-2006, 10:35 AM

quote:Originally posted by hiawatha

quote: Perhaps my analogy is a little obtuse, so here is my explanation.
an analogy can never be 'obtuse'. Only people can be 'obtuse', as was hiawatha on this occasion. Your excellent explanation removes the opacity.
hiawatha

JEEZE you know a lot of big words for an INJUN.

kura

02-07-2006, 04:02 PM

Does anyone have any thoughts as to who will be the "winners" from splitting/ULL scenario, the market is saying that TEL isn't going to win, that leaves us with either competitors or consumers (or some mix of both) benefiting

Have been following fate of iinet (IIN) on ASX recently (pretty ugly) and wondering if it could be worth a punt, (director also buying)share price has stabilised after a dramatic fall from grace, though my enthusiasim is tempered by fact that they may need to raise further capital in future. The way I see it as combined Aust/NZ #3 ISP, they are in a position to benefit from the regulatory problems that both TEL and TLS have in their home markets ?

kittydashwood

03-07-2006, 10:11 AM

From Motely Fool:

Telecom New Zealand: Bull or Bear?

By Vitaliy Katsenelson, CFA
June 30, 2006

Every trade has a buyer and seller taking opposite sides. They often have different risk tolerances, time horizons, and beliefs about the direction of a stock. And before purchasing any stock, investors should build a good bull case that refutes the bear case. In that spirit, I'll spend the next few paragraphs making both a bullish and a bearish case for Telecom New Zealand (NYSE: NZT), and I'll let the reader decide which argument is more convincing.

Bull case
In the past couple of days, Motley Fool Income Investor recommendation Telecom New Zealand announced that it will voluntarily separate its operations into retail and wholesale units.

The company will have two independent units. Wholesale would still be a regulated monopoly, not unlike Telecom New Zealand today, selling retail providers access to its network. Telecom's retail operation would be one of the providers (likely an unregulated one) buying services for the same price as the rest of the retail competition from the wholesale division. This is a very logical route for the company to take.

I have to hand it to Telecom's management. This is a brilliant move on many fronts, and here is why:

* It will preemptively get the New Zealand government off its tail. It is hard to go medieval on a company that is trying to promote competition and become friendly.

* This separation of wholesale and retail operations was a very likely outcome of the Kiwi government's future actions. Now it will be done on mostly Telecom New Zealand's terms, not the government's. Similar to a child that eats a forbidden cookie, as a parent you would not punish the child as hard if he or she comes to you first and suggests a punishment. Telecom New Zealand did just that.

* Once the telecom market was opened to competition, a new type of strategy was needed to effectively compete in the "new" marketplace. Separating and managing retail and wholesale operations will allow the company to manage each division appropriately: Wholesale operations will likely be managed for asset and free cash flow maximization -- attempting to get as much as possible from the existing assets. It is still a regulated monopoly with somewhat limited revenue upside, after all. And since competition instead of government will be breathing down the neck of its retail operations, a relatively new development for this company that has operated (at least on the wired side) in a competition-free vacuum, the retail operations will require a very different approach -- a marketing touch.

Other considerations
The threat of competition may be overblown. If the deregulation happened in any other place, new competition would likely bring down the prices and compete away "the monopolistic profits" from the incumbent. However, New Zealand is not the rest of the world. The country's unique geography -- two mountainous islands in the middle of the South Pacific and a relatively small population of 4 million people -- is likely to prohibit new entrants from achieving a much-needed scale to become formidable competition.

The relatively small market size will very unlikely invite the big fish. Telstra (NYSE: TLS) is busy with its problems in Australia, and Vodafone (NYSE: VOD), a wireless competitor in New Zealand, doesn't have wired business outside Germany, though this could change, and it is a viable risk. (I discussed this issue in a previous article.) The smaller competitors will likely play a similar role that Apple (Nasdaq: AAPL) played so well for Microsoft (Nasdaq: MSFT) for a long period of time -- its existence and small market share in the desktop market has kept the government (mostly) off Microsoft's back.

The government has absolutely no intention of destroying Telecom New Zealand – it is one of the country's largest employers, and the stock represents close to 25% of its stock market's entire market capitalization. The government wanted to introduce some competition into

COLIN

03-07-2006, 12:10 PM

The trouble is that this increasingly socialistic Government is not at all well disposed towards Telecom; in fact, it delights in seeing Telecom wriggle and squirm, as it sinks the knife in, because it knows that the masses who vote for it - and relatively few of theses would be Telecom shareholders - just hate seeing headlines like "Telecom's profits hit $800 million" or whatever, or "Gattung takes home $2 million while workers freeze".

Snoopy

03-07-2006, 12:38 PM

quote:Originally posted by kittydashwood

From Motely Fool:

Telecom New Zealand: Bull or Bear?

By Vitaliy Katsenelson, CFA
June 30, 2006

Thanks for bringing this article to our attention Big Bear. I don't entirely side with either the bull or the bear case. Comments follow.

quote:
Bull case

The company will have two independent units. Wholesale would still be a regulated monopoly, not unlike Telecom New Zealand today, selling retail providers access to its network. Telecom's retail operation would be one of the providers.

I have to hand it to Telecom's management. This is a brilliant move on many fronts, and here is why:

* This separation of wholesale and retail operations was a very likely outcome of the Kiwi government's future actions. Now it will be done on mostly Telecom New Zealand's terms, not the government's.

IMO, in the long term there will be almost no difference whether the government regulates Telecom, or Telecom regulates itself. If there is a difference it will only be a timing issue. Where there is a natural monopoly some regulation is expected. And the financial extent of that regulation depends on the cost of capital of the business case.

Put simply the government cannot force a private company to invest in new business opportunities that do not return their cost of capital. I'll repharase that a bit. Legally the government can pass whatever laws they can get through. But if the government forces a company, like Telecom, to invest in an uneconomic project there will be a spin off effect on other companies and other projects in other industries. Forcing Telecom to operate at a loss would be untenable for that reason.

The cost of capital of operating the local loop does not change, depending on what the government thinks. And whatever cost of capital is chosen by the regulator, be it Telecom or the government, will determine the future profitability of Telecoms monopoly assets.

quote:
New Zealand is not the rest of the world. The country's unique geography -- two mountainous islands in the middle of the South Pacific and a relatively small population of 4 million people -- is likely to prohibit new entrants from achieving a much-needed scale to become formidable competition.

This line has come from the Telecom spin machine. I wonder what the difference in cost is between erecting a telephone pole on a hill, instead of on flat ground? Do you have to dig a deeper hole? No. Is it more complex to string cables on a hill verses the flat? Not really.

Also IMO the total size of the telecommunications serviced population is largely irrelevant. It is the fact that the population is widely distributed that is the problem.

quote:
Bull conclusion

Most importantly, the dividend should be intact. In the worst case, the reduction to the dividend will be very small. Telecom's dividend is set to be 85% of its net income. The net-income figure used in the dividend calculation is a somewhat subjective measure as one-time charges and noncash items are added back in it.

While I agree that Telecom could leave their dividend intact, I don't believe it would be wise politically to do so. The government will want to see evidence that Telecom has bumped up their levels of investm

duncan macgregor

03-07-2006, 05:12 PM

SNOOPY, Something you havent taken into account is the cost of getting rid off, or holding on to the arrogant fat lady at the top.
No names mentioned but it might go a long way to appeasing the other arrogant lady that runs the country. macdunk

Snoopy

03-07-2006, 06:34 PM

quote:Originally posted by duncan macgregor

SNOOPY, Something you havent taken into account is the cost of getting rid of, or holding on to the arrogant fat lady at the top.
No names mentioned but it might go a long way to appeasing the other arrogant lady that runs the country. macdunk

Allow me elucidate how these things work MacDunk.

Theresa is already gone. That ghost that is currently walking the corridors of power at Telecom HQ that looks like TG is now a hired hatchett woman. She will complete the restructuring required, take the unpopular decisions and then fall on her sword. Then under the new CEO, the new Telecom will be in business again.

TGs base salary is $NZ1.1m. All the higher figures you hear bandied about are bonuses from the performance incentive scheme and the performance option scheme. I don't think she will be getting much in the way of a bonus this year, do you?

$1.1m spread over the 1,958m shares on issue amounts to 0.00056cps. Even if they gave TG five times her salary as a severence package, that is still well under half a cent per share. The departure of TG, when she officially goes, will not be an issue.

SNOOPY

Snow Leopard

03-07-2006, 10:02 PM

quote:Originally posted by aspex

Conclusion.
So TEL really is worth $4.10 then?
Face up to the fact that once enough overseas "rats" have swum off, there is still a major utility left with some good base income.
Wireless can ultimately make a hole in the copper network but the investment required is horrendous.
Medium term the change at the top will occur. Personally, I have always seen RD as a thorn in Telecom's side. TG will wield her hatchet and the new Chair will offer a steady hand.

Yes, TEL is worth $4.10 and...
No, actually TEL is worth more and...
No, actually TEL is worth less.

The telecom sector is a political football at the moment.
That is the issue.

Snoopy

10-07-2006, 11:59 AM

quote:Originally posted by kura

Does anyone have any thoughts as to who will be the "winners" from splitting/ULL scenario, the market is saying that TEL isn't going to win, that leaves us with either competitors or consumers (or some mix of both) benefitting
.

Yes. I think the winner will be Telecom. The exact opposite to what Mr Market thinks. I backed my bet on Friday by buying more Telecom shares. Perhaps you might be interested in the case against Mr Market...

Since the local loop unbindling announcement the Telecom share price has gone down from around $5.50 to $5 and then $4. This reaction is not an unexpected reaction to 'bad news'. What I think is unusual is the way the price fell: By 10% on announcement and by a further 20% in the month following. If the smart money was really so sure about this 'catastrophic event', why did the market price not fall sooner to $4? Furthermore if you look at the company announcements by Telecom over that subsequent month I can find nothing of consequence. My conclusion is that over this last month the market has been adrift. Mr Market has no idea what the value of Telecom is, except that it is probably between $4 and $5 (a huge range). There is my cue to take advantage of manic depressive Mr Market....

Back to the original LLU leak. Is there any evidence that this is bad for Telecom? Surprisingly the answer is no. If you look at what has happened to British Telecom (BT) in the five years since LLU took effect (see Focus Investment Group on the other channel) there you will see that profitability has not been affected at all! I say that with the usual disclaimers. The NZ market is not the UK market and there is no guarantee that the competitive dynamic will behave the same as it did over there blah blah. But there is more to my 'bullish TEL outlook' than just the hope that Telecom NZ will be able to whether the storm a well as BT did.

Bitstream access charges: I quote from the recent commerce commission ruling on access pricing for alternative retail providers 'Ihug' and 'Callplus'.

"The Commission has determined that the price for bitstream access is $28.04 per month. The Commission deducted price elements attributable to service components not supplied by Telecom, by imputing a retail price having regard to Telecom's comparable Jetstream services. A further allowance has been made to reflect those costs that Telecom avoids when providing bitstream access at wholesale rather than retail."

$28.04/month equates to an annual access charge of $336.50 per year. In the UK after years of heavy handed regulation brought about by CPI-X pricing rules, BT wholesale access charges are - which equates to $300-$330. Especially taking into account NZs lower population density, these figures are very close. It would be hard to argue that any further reduction in the Telecom wholesale price was justified.

Want more evidence? Look at the regulatory asset value lives that Oftel, the UK government has put on the copper loop and access ducts in the UK. Note that the longer the life applied to an asset, the longer period that can be taken to recover the costs of that asset. Hence 'wholesale charges' are regulated lower with longer asset lives. Oftel forced BT to increase their asset lives for regulatory price setting purposes. Yet if you look at the lives of Telecom's cooper wires and access ducts they are already greater than even the latest bumped up UK figures! In short Telecoms asset lives if anything need to be reduced (that means higher wholesale charges) to comply with world norms.

Let's try a few revenue numbers. Let's say that after five years Telecom's local service retail market share reduces by 30%. Most of these customers are not lost to Telecom completely. They simply become wholesale customers not retail

kura

10-07-2006, 12:47 PM

All this uncertainty has me confused as to the inherent value. (and I suspect I'm not the only one confused)

So I decided to have a "dollar each way bet" and purchased some IIN (ASX) and TEL last week. TEL and IIN both seemed to have stabilised after some hefty falls, so (hopefully) have limited remaining downside.

duncan macgregor

10-07-2006, 01:01 PM

quote:Originally posted by Snoopy
Yes. I think the winner will be Telecom. The exact opposite to what Mr Market thinks. I backed my bet on Friday by buying more Telecom shares. Perhaps you might be interested in the case against Mr Market...
There is an absence of any quantified negative effects from Local Loop Unbundling. There lots of quatifiable evidence to suggest that Telecom revenue will not fall catastrophically. I conclude that Mr Market has made a huge mistake with Telecom. Telecom at $4 is irrational any way you care to look at it. Macdunk likes predictions so here is mine: TEL at $5 before the end of the year. Happy bargain hunting everyone.

SNOOPY
discl: hold TEL, have bought more and am looking at buying even more.

SNOOPY, I have got to give it to you in one respect that you never admit when you are wrong. Averaging down will be your downfall. Your system at the moment is way behind what i would call an acceptible return. You seem to be in the market for a completely different reason to me. I really dont care if i am right or wrong, as long as i get my 20pc plus dividends or better.
Surely you have a better place to park your money than in a company on a confirmed downtrend, that has cost you heaps already.
I hope you are right with your prediction, but i doubt it, TEL will go side ways, and if anything downtrend.
YOU ARE COMPLETELY WRONG SNOOPY GET A PARACHUTE NO REQUIREMENT TO GO DOWN IN A BLAZE OF GLORY LIKE YOUR NAME SAKE.
macdunk

croesus

10-07-2006, 01:28 PM

Snoopy would be interested on your opinion re the TELIZB warrants, generally I concur with your view re TEL and I made my first purchase today, whilst I and nobody else knows if this stock will get cheaper.... the contrarian gene in me says buy.
cheers Croesus.
P.S If you live in Wgton I recomend the WID meeting at the end of this month.

winner69

10-07-2006, 09:12 PM

quote:Originally posted by croesus

Snoopy would be interested on your opinion re the TELIZB warrants, generally I concur with your view re TEL and I made my first purchase today, whilst I and nobody else knows if this stock will get cheaper.... the contrarian gene in me says buy.
cheers Croesus.
P.S If you live in Wgton I recomend the WID meeting at the end of this month.

You obviously think the outlook for TEL is +ve and that are to be some good gains to be made

In that case the warrants make sense .... in addition to leveraging your investment you get the full dividends and the imputation credits .... one of the better ways to maximise the returns if you are that convinced of the future.

PS .... but bear in mind if you are wrong the consequences are more dire than just holding the share ....

Enumerate

10-07-2006, 10:46 PM

I agree with the assessments that TEL.NZX is oversold.

The only caution I have is that a government prepared to wipe $2billion off the share in support of an attempt at tarting up a budget with a "surprising" announcement - is also capable of further "surprises".

Cunliffe is using Telecom as a political football. He wants to be Minister of Finance when Cullen retires but is clearly demonstrating that maybe he should take over from Cath Tizard as Minister for (or against) Auckland.

If the issue Cunliffe has with Telecom is that broadband is not cheap enough - it costs $1 per day. I pay more when I buy a coffee. Maybe Cunliffe should regulate coffee houses? We now pay more, per day, on automotive fuels - maybe he should regulate oil companies? Council rates are on the rise - when you consider all the tricks (water rates) used to extract more money - maybe they should be regulated?

About the only thing you can say when faced with a government assault on the largest company on the NZX is "advance Australia fair".

warthog

11-07-2006, 09:09 AM

quote:Originally posted by Enumerate

If the issue Cunliffe has with Telecom is that broadband is not cheap enough - it costs $1 per day. I pay more when I buy a coffee. Maybe Cunliffe should regulate coffee houses? We now pay more, per day, on automotive fuels - maybe he should regulate oil companies? Council rates are on the rise - when you consider all the tricks (water rates) used to extract more money - maybe they should be regulated?

None of these things are holding back development of the digital economy in New Zealand. If you - like Snoopy I suspect - think that the digital economy isn't as important as some would hold it up to be, then you have a big surprise in store.

You know very well that the government is interested in results. By and large they let the market sort it out but in some areas regulation is desirable to give the market a hurry-up. NZ can't wait for the market to sort itself out in a sector dominated by a single large player who holds most of the cards.

duncan macgregor

11-07-2006, 09:43 AM

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

11-07-2006, 10:23 AM

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.

Enumerate

11-07-2006, 10:29 AM

quote]Originally posted by warthog
None of these things are holding back development of the digital economy in New Zealand. If you - like Snoopy I suspect - think that the digital economy isn't as important as some would hold it up to be, then you have a big surprise in store.
[/quote]

The proposition that Telecom is holding back the digital economy is absolutely absurd.

The issues with the digital economy ceased to be transport layer issues over a decade ago. The rate of investment in bandwidth has significantly outstripped demand for, clearly, over a decade.

The problem with the digital economy is the lack of good business models. It is an unfortunate fact that the single highest bandwidth application on the Internet is pornography download. That's one good business model - setup a porn site. eBay has demonstrated another good model (copied by Trademe). Amazon is a third, but we lack the full distribution model and scale to copy this in NZ. Music/video download will probably emerge as a full competitor to television - but at the moment there are fundamental copyright/payment issues.

The general perception that unless people who live in caves have universal access to broadband services - the digital economy won't take off - is another fallacy.

Regulation will have the effect of killing investment in infrastructure. I expect Telecom will now expect 5 years of life from a capital investment rather than 3 years or even 18 months. The people now invited to setup DSLAMs are being asked to invest in a market with a declining margin. I don't see the growth to compensate for the diminishing return.

Regulation, at this point, is one of the most idiotic moves imaginable. I can only suspect that Wellington politics are driving a move of such profound stupidity - it is certainly inexplicable in business terms.

If the government had such profound insight into ICT matters - why do they significantly overspend on their own technology and have such a high rate of project failure? (Justice sector, Health sector, Education, Internal Affairs, State Services - a litany of failure).

Enumerate

11-07-2006, 05:29 PM

Belgarion, if you want a domain registrar that will get your domain registered and propagated within hours - let me know.

If you are looking for high performance domestic NZ hosting with peering arrangements with TEL and TLS - let me know.

If you want some cycles on a VMware cluster - so you can host that Cold Fusion, NT 4.0 system that you don't want to touch, ever - let me know.

If you need a SQL Ent 2005 on a Windows Server 2003 R2 - IA64 editions on a SAN connected Itanium - let me know.

warthog

11-07-2006, 07:48 PM

quote:Originally posted by Enumerate

The proposition that Telecom is holding back the digital economy is absolutely absurd.

Hmmm. You seem to be under some misunderstanding that the warthog wants a country full of boo.coms. Nope. What the warthog would like to see is an overall harnassing of technology to imrpove the efficiency of what New Zealanders do in their lives, and much of that is to do with the economy. It's not all about buying books, or porn (feel free, though), online. Services provision, trading platforms, information management, collaboration, ... it goes on and on. It is not an overnight thing - it is a process. And that process does require up-to-date use of current technologies. Unfortunately, TEL has been left in too dominant a position for too long, and they've been asleep at the wheel. Well, you could also say that the government has also been asleep at the wheel, but they've just woken up.

The Nordic countries are ahead of the play in many ways. Issuing of personal digital certificates for authentication is just one step.

Belgarion didn't ask for domains registered and propagated within hours or high-performance domestic hosting/peering, nor processing cycles on some cluster, nor Cold Fusion hosting or a headache (dealing with MS NT 4.0). Reading his post he or she mentioned a static IP, probably as in statis DSL connection IP, which takes far longer here than it should - just because TEL isn't interested in doing anything else.

You've been reading up on straw men now haven't you!

Enumerate

12-07-2006, 07:19 AM

If Telecom has problems with their service offering, I would expect that others would take their place within the economic "niche". For example, we use Vector optical fibre and ICONZ upstream. Domestically, we don't touch Telecom infrastructure unless the destination is a Telecom address. Throughout the country, in the major metro areas, infrastructure indepement of Telecom is ready and available.

There are backbone network providers (I am aware of a group reactivating the optical fibre running on the rail lines). BCL has significant backbone infrastructure. IBM and partners are offering an independent transport backbone across the North Island.

The registrar system is independent of Telecom.

With, respect, if you are unhappy with any level of service from Telecom the market has dished up many alternatives. This is true for the retail customer, SME, large business, network provider.

In fact, that is what you do in free markets. If you don't like the service you are getting - you go elsewhere. The NZ market, small though it may be, offers many alternatives.

Further, I don't think people should look to Telecom to provide innovation and services at the cutting edge of IT architecture. They are a physical network, transport services provider. They don't understand application/database services. Professionally I have intense frustration with their clumsy and inappropriate approaches to sector or market ICT initiatives. They are almost as bad as government. I think the Gen-i and Computerland purchases were a collosal mistake - these businesses will lose the innovation and "edige" within the Telecom culture.

You talk about digital certificates. We bought the assets of 128i/Baycorp ID Services and run it as Digital Identity Ltd. We are the only private sector NZ provider of digital certificates (State Services has spent million$ at a number of attempts at building RA/CA services for the government sector; others "rebadge" Versign certs from overseas). This is a business in which government (SSC) has effectively shutdown an established private sector specilist company(128i) at the cost of multiple million$ to the tax payer. I doubt the SSC could run technology or the business processes as efficiently as we do at Digital Identity; but the fact they mandate their service within government makes it very hard for us to grow our business.

You indicate I am guilty of the "strawman" fallacy. I hope you agree that my points are on the point, with the clarifications above.

warthog

12-07-2006, 08:02 AM

quote:Originally posted by Enumerate

In fact, that is what you do in free markets. If you don't like the service you are getting - you go elsewhere. The NZ market, small though it may be, offers many alternatives.

This is the crux of the matter. TEL has kept the infrastructure here expensive and kneecapped because (a) they can and (b) it suits their bottom line. Domestic naked broadband should have been pretty much ubiquitous here by 2002 which would have pump-primed the further development of digital service provision and integration into the existing economy and infrastructure.

By the way, the warthog agrees with your criticism of the government, State Services, etc. However, as unfortunate as it may seem, provision of authentication mechanisms in respect of government services needs to be a public initiative.

BRICKS

12-07-2006, 10:32 AM

ALL of this is BIG stuff,, So thanks cannot do to much as in RUSSIA.. [8D]

warthog

12-07-2006, 10:17 PM

quote:Originally posted by BRICKS

ALL of this is BIG stuff,, So thanks cannot do to much as in RUSSIA.. [8D]

You should become a lawyer Bricks, and specialise in writing terms and conditions.

Héll, I'd hire you. ;)

BRICKS

12-07-2006, 10:59 PM

quote:Originally posted by warthog

quote:Originally posted by BRICKS

ALL of this is BIG stuff,, So thanks cannot do to much as in RUSSIA.. [8D]

You should become a lawyer Bricks, and specialise in writing terms and conditions.

Héll, I'd hire you. ;)

BRICKS is traveling with his own personal LAWER on tap 24 hours ADAY..[8D]

warthog

13-07-2006, 07:53 AM

quote:Originally posted by BRICKS

quote:Originally posted by warthog

quote:Originally posted by BRICKS

ALL of this is BIG stuff,, So thanks cannot do to much as in RUSSIA.. [8D]

You should become a lawyer Bricks, and specialise in writing terms and conditions.

Héll, I'd hire you. ;)

BRICKS is traveling with his own personal LAWER on tap 24 hours ADAY..[8D]

Is LAWER a beer or some type of drink?

BRICKS

13-07-2006, 08:33 AM

quote:Originally posted by warthog

quote:Originally posted by BRICKS

quote:Originally posted by warthog

quote:Originally posted by BRICKS

ALL of this is BIG stuff,, So thanks cannot do to much as in RUSSIA.. [8D]

You should become a lawyer Bricks, and specialise in writing terms and conditions.

Héll, I'd hire you. ;)

BRICKS is traveling with his own personal LAWER on tap 24 hours ADAY..[8D]

Is LAWER a beer or some type of drink?

THAT`s WHY YOUR A DUMB KIWI.. [8D]

port hills

13-07-2006, 08:34 AM

This morning on "ASB Business" TV one, Tim Preston of ASB Securities said that the current rally in Telecom share price would top out at $4.40-$4.50 max. then proceed to decline below $4.

I was amazed by this, I don't recall ever seeing a broker on TV make such a prediction ie one that will clearly prove to be right or wrong.

[:0]

Enumerate

13-07-2006, 09:20 AM

He must have an amazing crystal ball.

Maybe he got some "inside knowledge" from Goldstein?

Maybe he has a current subscription to next months newspapers?

duncan macgregor

13-07-2006, 09:47 AM

The man is quite right thats what is likely to happen. The people buying in are the ones that think its over sold, plus the people that think that those people will think that, and catch the ride up. In reality it is not over sold, but under sold, as time will tell.
The whole fundamental scene has changed, this company can no longer exploit its position but has to get back in line and compete.
SNOOPY made the prediction that TEL would hit $5 before the year is out which is stretching it on the high side. What happens when the bottom line gets produced with ever diminishing profits?. The first thing to be hit is dividends, the last thing to take a tumble will be the swill in the trough for the top dogs. macdunk

lucky

13-07-2006, 10:23 AM

Tim Preston pointed out that $4 was a trigger for people to buy Tel as they saw this as the bottom of the fall.And as port hills points out, that may not necesary be the case as Tel has a lot of hurdles to jump yet.Share price down a little this-morning, perhaps people do watch the 6.30am show on one, The guy who runs it is as useless as tits on a bull.

Lawso

13-07-2006, 01:53 PM

quote:The guy who runs it is as useless as tits on a bull.
Another cheap shot from a small-minded nobody. Is this how these morons get their kicks?
There's nothing wrong with Wilson. He's a competent journalist who lets the others do the talking, rather than try to impose his own personality. The programme is clearly under-resourced for back-up staff, IMO.
In other respects, e.g. 6pm News, TVOne is almost useless for business news.

lucky

13-07-2006, 02:25 PM

Lawso.......So you see the program as having problems, so do I , perhaps that is what I was saying.
The Japan market was closed for 3 bussiness days a few weeks back and each morning Mr Wilson reported the Jap market as being up 220 points on each of those days it was closed ...like he didnt know. Small minded alright.

lanenz

13-07-2006, 02:37 PM

quote:Originally posted by lucky

Lawso.......So you see the program as having problems, so do I , perhaps that is what I was saying.
The Japan market was closed for 3 bussiness days a few weeks back and each morning Mr Wilson reported the Jap market as being up 220 points on each of those days it was closed ...like he didnt know. Small minded alright.

lol[:0]

biker

13-07-2006, 03:56 PM

At least he has stopped nodding his head when he talks.
Too many talking heads on that programme IMHO and not enough journalism. I agree Lawso. TVNZ have obviously provided the programme with a tiny budget.

Bottom Feeder

13-07-2006, 09:16 PM

I think large sharetraders were selling off before 30 June to get the tax loss. (have to sell to make the loss for tax purposes)

After 30 June they buy back as soon as possible at around the same price.

The rise was too quick with no news to speak of.

May go to 4-50 if enough suckers think its a real rally. The money in Tel is to hold it for a year or two.

Lawso

17-07-2006, 03:32 PM

I reduced my TEL holding by about half last week, selling for 426 (today 418), partly because there is much better stuff to buy (e.g. AIA, STU and the Aussie banks), partly to cement a paper loss of around $16k, which should stave off the IRD if they're thinking of having a go at me for CGT.

Yes, yes, I know I should have sold/reduced sooner, but how many saw all this coming? And I want to hang on to some TEL because it's a core holding and, like BF above, I think they'll improve - but maybe not wholly recover - over the next year or two.

Placebo

17-07-2006, 04:40 PM

quote:And I want to hang on to some TEL because it's a core holding

Lawso, what on earth can you mean by "it's a core holding". Core of what? You seem to subscribe to the syndrome where you can't admit that you got it wrong, you hang on in the vain hope... "just in case". I did this with SKC, sold down but not entirely out of my holding. What happened? It went nowhere while there were far better opportunities about.

Take my advice: Get out man! Get out now!![B)]

duncan macgregor

17-07-2006, 05:21 PM

Rotten to the core is the expression. LAWSO look on it as a learning experience then move on. If you didnt see it coming you are blind. If you are still holding, you are daft. If you watched it downtrend and still held on, then your system if you have one is faulty. This company will still be in a downtrend in twelve months from now. macdunk

peat

17-07-2006, 08:12 PM

or, (Lawso) you could hedge using CFD's
tho why one would want to be long and short I'm not really sure - unless you think brokers are having a tough time

The BOWMAN

17-07-2006, 10:17 PM

Dump your shares to me. Honestly, I want more. [8D][8D][8D]

Lawso

18-07-2006, 10:36 AM

quote:You seem to subscribe to the syndrome where you can't admit that you got it wrong, you hang on in the vain hope... "just in case"

quote: If you didnt see it coming you are blind. If you are still holding, you are daft. If you watched it downtrend and still held on, then your system if you have one is faulty.
Gee thanks, guys. Your reactions don't surprise or bother me. Everyone has their own approach and their own expectations. I'm happy with mine.
But, for the record, I sold out of -
FTX @ 168 (now 22)
VCT @ 263 (now 252)
DPC @ 250 (now 207)
CHA @14.7 (now 10.5) and
GEN, most of them for $4 in '01, finally for 32 (now 27).

Deev8

18-07-2006, 02:14 PM

So the next round of "the unbundling game" begins:

Telecom has told its competitors it has power supply problems and little or no room for extra equipment in its main exchanges as it begins opening its network to other internet providers.

Orcon regulatory manager Scott Bartlett ... hoped Telecom would not play the games that British Telecom did - creating technical problems - which made it difficult for competitors to gain access to its network.

NZ Herald - No room, Telecom tells rivals (http://www.nzherald.co.nz/section/print.cfm?c_id=3&objectid=10391755)

D_Pick

20-07-2006, 01:14 PM

Investors still holding on around that $4 physcological mark. I think there is further to go with so much revenue uncertainty going forward.

The monthly recurring rental income for a residential voice phone line appears unsustainable to me given today's VoIP technology.

Telecom minimum monthly voice line rental $34.95/mth = $419 per year
versus Telstra at $31.95/mth = $384 per year

Although the regulators have made a start on unbundling/introducing competition in the broadband internet space a consumer is still required to pay Telecom an expensive monthly line rental for a voice line regardless if they use that service to make local voice calls, just so that they can get access to a "high" speed ADSL internet service. So when telecom is advertising cheap highspeed internet from $29.95 ($1 dollar a day), they should actually be saying high speed internet from $2 (double the amount advertised) as the consumer must also pay the minimum voice line rental at around $35/month.

Assuming services like Slingshots iTalk or Skype take off for making voice calls, which I think is inevitable, then Telecom's revenues in the voice space must be under considerable pressure going forward.

Free local calling needs review, as this allows the two network operators Telecom and Testra to keep their monthly line rentals and overall bills artificially high given today's technology.

duncan macgregor

20-07-2006, 01:39 PM

quote:Originally posted by duncan macgregor

WINNER69, One little point that you missed out in your sums is the rise and fall in the dollar. TEL have had a lot of overseas investors buying in to a rising dollar then selling out at the top. I think other than that anyone caught holding this arrogant dog deserves very little sympathy. I think big changes at the top will come to late to save TEL which will continue to downtrend. macdunk

Thats what i said before nothing has changed so look out for a prolonged downtrend. SNOOPY says the sp at $5-00 in twelve months i say $3-00. macdunk

trackers

20-07-2006, 01:49 PM

quote:Originally posted by D_Pick

Investors still holding on around that $4 physcological mark. I think there is further to go with so much revenue uncertainty going forward.

Think you just gave it the good ol commentators curse [8D]

Gryffyn

20-07-2006, 01:53 PM

just limbo'ed under that $4 bar...

trackers

20-07-2006, 02:05 PM

Dodgy "Telecom has told its competitors it has power supply problems and little or no room for extra equipment in its main exchanges as it begins opening its network to other internet providers." + Keeping Theresa on = bye bye $4

Snoopy

20-07-2006, 05:10 PM

quote:Originally posted by D_Pick

Investors still holding on around that $4 psychological mark. I think there is further to go with so much revenue uncertainty going forward.

There is a bit more to $4 than 'psychology'. If you take off the 15c dividend which is imminent, then we are already at $3.85. That equates to an ongoing dividend yield of 15% based on current dividend levels. AFAIK no company on the NZX has ever traded on a sustained dividend yield of more than that. Of course there is widespread speculation that the dividend may be cut. But a dividend cut is not inevitable. And no earnings downgrade has been announced.

Anyone basing their decisions on what will happen specifically to Telecom based on available announcements is operating in a knowledge vacuum. To be 'safe' you should wait until early August when Telecom releases their looking forwards statement. But when similar unbundling was forced through British Telecom in the UK, profits did not decline. Nor did dividends fall. So I'm picking that betting profits will *not* fall by 30% (in accordance with the NZ market expectation vis a vis the TEL share price decline) is a bet worth taking. That is why I have been buying more Telecom shares recently.

quote:
The monthly recurring rental income for a residential voice phone line appears unsustainable to me given today's VoIP technology.

Telecom minimum monthly voice line rental $34.95/mth = $419 per year
versus Telstra at $31.95/mth = $384 per year

Huh? What on earth has VoIP got to do with the monthly line rental? VoIP is certainly a threat to toll call revenue. But perhaps you didn't know that Telecom is *already* offering VoIP, without the need for a separate 'VoIP Box,' via their 0161 service?

Of course generally you need broadband and a seperate 'box' to use a competitive VoIP service like 'Skype'. But the cost of even naked broadband is about the price of a normal line rental anyway. There is not much saving to be made, especially in New Zealand, by going to an alternative VoIP service when all local calls are already free. Also VoIP is a lower quality service - the lines are not necessarily as clear. Overseas experience has shown that even those who adopt VoIP do not give up their normal lines. I'm not saying that in ten years time they won't. But your vision, D-Pick, of an imminent mass exodus from normal line rental is way over the top

quote:
Although the regulators have made a start on unbundling/introducing competition in the broadband internet space a consumer is still required to pay Telecom an expensive monthly line rental for a voice line regardless if they use that service to make local voice calls, just so that they can get access to a "high" speed ADSL internet service. So when telecom is advertising cheap highspeed internet from $29.95 ($1 dollar a day), they should actually be saying high speed internet from $2 (double the amount advertised) as the consumer must also pay the minimum voice line rental at around $35/month.

If I could get naked DSL to my house and flick the phone line I might consider it. But I'm not on broadband at the moment. If I bought my naked DSL from Telecom, then it doesn't follow that Telecom will be worse off because of my switch.

[quote]quote:
Assuming services like Slingshots iTalk or Skype take off for making vo

jonny5

20-07-2006, 07:23 PM

I think telecom may be good for a short term 5-7% gain. Right now there are just way too many factors to call it one way or another for me personally

-TCNZ employee.

duncan macgregor

20-07-2006, 07:31 PM

SNOOPY, You have been wrong all the way from start to finish with TEL, what makes you think you have it right this time?. I would love to see you get it right instead of pouring more good money down the drain playing catch up trying to prove a point. Macdunk

stevieb

20-07-2006, 07:39 PM

quote:Originally posted by MoSteph

321 mill today... very high volume .... who's buying eh eh?

Very high turnover on ASX too, around 74M vs usual 2-3. Sounds to me like there's action in the wind!

Snow Leopard

20-07-2006, 08:15 PM

quote:Originally posted by duncan macgregor

SNOOPY, You have been wrong all the way from start to finish with TEL, what makes you think you have it right this time?. I would love to see you get it right instead of pouring more good money down the drain playing catch up trying to prove a point. Macdunk

NO. You think he is wrong, and your opinion, believe it or not, is worth no more than anybody elses.
Snoopy has his own rules for buying and selling, and while I do not agree with them, I will defend his right to have them and will give him his due for sticking to them.

best wishes
Paper Tiger

duncan macgregor

20-07-2006, 09:37 PM

Good on you paper tiger nobody is saying SNOOPY should not have an opinion. SNOOPY and i have been debating for years we dont need a ref.
macdunk

Snoopy

20-07-2006, 11:10 PM

quote:Originally posted by stevieb

quote:Originally posted by MoSteph

321 mill today... very high volume .... who's buying eh eh?

Very high turnover on ASX too, around 74M vs usual 2-3. Sounds to me like there's action in the wind!

First quote in dollars and second quote in shares! That is really mixing up the candy.

Total number of shares traded was around 150m today which is around 7.66% of the company. "Westpac Banking Corporation - Client assets number 2" selling out? The number of shares on the register on 5th August 2005 roughly match those traded today. Anyone know what kind of fund that Westpac thing is?

I think that if someone is building a stake in Telecom, it will be August (after Telecom's year ahead outlook statement) before any move is made public. Any bidder would just have to know how much money Telecom is going to stump up in order to to satisfy the government before they could know if any leveraged buyout plan could work. This company Telecom isn't like Carter Holt sitting on a whole pile of lazy assets. The 'asset' that Telecom has is strong cashflow. But no-one (not even Graeme Hart) knows how strong that cashflow is until we learn how much will be siphoned off in the short term to make this unbundling happen.

You think I have it wrong Macdunk? The facts so far are:

1/ No reduction in earnings tabled to the market.
2/ No reduction in dividends tabled to the market.

Until I see any other company willing to take on Telecom, I think it would be foolish to bet on any other scenario than Telecom maintaining its profitability in the long term. Shorter term there may, I stress *may* be some pain. The market thinks profitability will be down some 30%. If you Macdunk think the share is fairly valued at $3 you think profits will fall by around 50%. Both boldly negatve calls, but we only have a couple of weeks to get Telecom's own view on the matter. Be patient, as all will be revealed soon.

Did you see that Ihug was cast adrift today, with Australian parent Iinet, now looking for a buyer?

Also TelstraClear seem to be bypassing the local loop (despite unbundling) and going WiFi in Tauranga.

Are these not two votes in favour of unbundling not making much difference?

I am starting to think we TEL shareholders will have another year of hefty dividends before any of this unbundling stuff starts to bite.

SNOOPY

warthog

21-07-2006, 08:43 AM

quote:Originally posted by Snoopy

The problem with your little rant, D_Pick, is that you seem to have no idea what Telecom are doing. You seem to think Telecom have no idea which way the Telecommunications market is moving

The warthog would venture that TEL could do with some more clues about where telecommunications "are going".

Goulter is quoted in the media today as saying ""We have an ongoing investment programme which is continually increasing the capacity of cabinets. We work very hard to keep ahead of demand ... But, in recent months, there has been extraordinary demand for new connections and that, unfortunately, means we are at capacity in a small number of areas."

This "small number of areas" include St Heliers and Remuera in Auckland, which are far from rural backwaters. Six months wait for broadband is a joke.

What on earth was TEL thinking all these years? While they were busy investing billions in overseas ventures, the basic infrastructure that telcos in progressive countries (Denmark, Sweden, Iceland, Singapore, etc.) was upgrading was allowed to basically rot in New Zealand. If you talk to the frontline TEL contracters, you will hear that they have used every trick in the (techincal) book to avoid spending anywhere near as much as required to keep the infrastructure current.

Well, the warthog would suggest that they were thinking that they could keep on playing the game, doing just enough to keep the government's lame-åss watchdog at bay while the horse got lame and the wheels started to fall off the cart.

duncan macgregor

21-07-2006, 09:12 AM

quote:Originally posted by Snoopy
You think I have it wrong Macdunk? The facts so far are:

1/ No reduction in earnings tabled to the market.
2/ No reduction in dividends tabled to the market.

Until I see any other company willing to take on Telecom, I think it would be foolish to bet on any other scenario than Telecom maintaining its profitability in the long term. Shorter term there may, I stress *may* be some pain. The market thinks profitability will be down some 30%. If you Macdunk think the share is fairly valued at $3 you think profits will fall by around 50%. Both boldly negatve calls, but we only have a couple of weeks to get Telecom's own view on the matter. Be patient, as all will be revealed soon.

Did you see that Ihug was cast adrift today, with Australian parent Iinet, now looking for a buyer?

Also TelstraClear seem to be bypassing the local loop (despite unbundling) and going WiFi in Tauranga.

Are these not two votes in favour of unbundling not making much difference?

I am starting to think we TEL shareholders will have another year of hefty dividends before any of this unbundling stuff starts to bite.
SNOOPY

SNOOPY, When will you ever learn. TEL are in a different situation now, the past is past, you were completely wrong then, as you are now.
TEL must now spend up big to keep us all happy, or stagnate, and down trend. We all think that they charge to much for starters.
Most of the people i know would go to the competition if they had a choice.
All your fundamental analysis over the years trying to prove that this is a good buy and hold, has been proved wrong over and over. This company is dog tucker, your averaging down will take you with it. The dividends on your shares wont be worth much if you take into account what you paid for them. We have debated this for at least a couple of years along with your RBD which i promised i wouldnt bring up again. I would suggest that if you deducted your dividends from your capital depreciation over the years you are well below the average. TEL,SCT,RBD,LPC, all bottom of the barrel stuff that is keeping your performance well under the monkey and dartboard level.
Attack SNOOPY give me a rev up on my lot some time. macdunk

beacon

21-07-2006, 09:53 AM

No Duncan. You conflict yourself. I agree that the past is now gone, and therefore I have been buying too. In fact, I have doubled my earlier position in Telecom now, and have been rapidly accumulating while it remains under $4.13.

I also agree with Snoopy that no dividend cuts or earning downgrades have been announced. I expect them to be finetuned in the near term, but not by as far as I had earlier feared. Also, agree with his analogy and difference with Carter Holt Harvey. My major concern now is the issue Warthog has raised about the quality of copper and its continual patching.

If that is addressed, my holdings in Telecom will be tripled. I am prepared to see Telecom fall to $3.50, although it may not come to pass, at least in the next 12 months. Whichever way the chips fall, I will be watching it carefully.

COLIN

21-07-2006, 08:57 PM

quote:Originally posted by beacon

No Duncan. You conflict yourself. I agree that the past is now gone, and therefore I have been buying too. In fact, I have doubled my earlier position in Telecom now, and have been rapidly accumulating while it remains under $4.13.

I also agree with Snoopy that no dividend cuts or earning downgrades have been announced. I expect them to be finetuned in the near term, but not by as far as I had earlier feared. Also, agree with his analogy and difference with Carter Holt Harvey. My major concern now is the issue Warthog has raised about the quality of copper and its continual patching.

If that is addressed, my holdings in Telecom will be tripled. I am prepared to see Telecom fall to $3.50, although it may not come to pass, at least in the next 12 months. Whichever way the chips fall, I will be watching it carefully.

Try as hard as I might, for the life of me I can't fathom why an experienced investor would eagerly stoke up on a downwards-tracking share, at around $4.13, at the same time that he/she seems to be acknowledging that a fall to $3.50 is quite possible. Presumably if it falls below $3.50 you will then sell?!
On another thread that great guru, Phaedrus, drew our attention to some valuable basic lessons of investing, a key one being NEVER, EVER, BE TEMPTED TO INVEST IN A DOWNWARDS-TRENDING SHARE!. As I stated on that thread, it is a lesson that I learnt the hard way.
I don't doubt that some day Telecom will start trending upwards, from some level or other, but wait until that trend emerges and don't outlay money on trying to pick the bottom. Those investment dollars of yours were too hard to come by, for that.

duncan macgregor

21-07-2006, 09:48 PM

Colin, your advice will fall on deaf ears. There as non as blind as those that refuse to see, or none as stupid than those that refuse to see reason. i might go on and on and on, but no point, some people will always stick their hand in the fire to see if it burns. Human nature dictates that every family sonner or later will be blessed by idiot descendants that throw the money back into the pot. That is the reason one family will never own the lot. i think that this is a good thing it keeps it going round. macdunk

Bottom Feeder

21-07-2006, 10:11 PM

For every buyer there is a seller. All those sellers who bought at $5 plus and now selling at $4 are the suckers. Buying now at $4-00 is the wise move.

If you didnt know the share price prior to today and you analysed this stock, it would be worth the risk to buy now based on the current dividend yield and an assessment of a drop even up to 40 - 50%.

Everyone seems to be very good with the benefit of hindsight. We'll see what happens in three or four months.

There is always someone who says a stock will keep dropping. Easy to say.

I am with Snoopy. Good analysis

BRICKS

22-07-2006, 03:30 AM

quote:Originally posted by Bottom Feeder

For every buyer there is a seller. All those sellers who bought at $% plus and now selling at $4 are the suckers. Buying now at $4-00 is the wise move.

If you didnt know the share price prior to today and you analysed this stock, it would be worth the risk to buy now based on the current dividend yield and an assessment of a drop even up to 40 - 50%.

Everyone seems to be very good with the benefit of hindsight. We'el see what happens in three or four months.

There is always someone who says a stock will keep dropping. Easy to sat.

I am with Snoopy. Good analysis

YOUR RIGHT,, there was a time when the same people on this site would not BUY WHS @ $2.80 today they fall over themselves to get in @ $4.80 time changes EVERTHING.. [8D]

StainlessSteelRat

22-07-2006, 07:25 AM

quote:Originally posted by Snoopy

Did you know that Telecom operates an IT services (solutions) business unit that turns over around $NZ1bn per year? I guess not!

Now this one pricked my ears up. I was sure that Gen-i wasn't doing that well, and so it proved: http://www.telecom.co.nz/binarys/financials_telecom_ar_05.pdf

Their revenue from services (solutions) was $321m in the 05 year and unless they've started fiddling the books it hasn't risen by almost $700m since.

You make some good points, but don't spoil it by making outlandish claims like the one above.

Snoopy

22-07-2006, 10:36 AM

quote:Originally posted by StainlessSteelRat

quote:Originally posted by Snoopy

Did you know that Telecom operates an IT services (solutions) business unit that turns over around $NZ1bn per year? I guess not!

Now this one pricked my ears up. I was sure that Gen-i wasn't doing that well, and so it proved: http://www.telecom.co.nz/binarys/financials_telecom_ar_05.pdf

Their revenue from services (solutions) was $321m in the 05 year and unless they've started fiddling the books it hasn't risen by almost $700m since.

You make some good points, but don't spoil it by making outlandish claims like the one above.

Things have moved on a bit since 2005 StainlessSteelRat.

From page 6 of the third quarter review:

"IT Services (Solutions) revenue was $249m, an increase of 19.7%. Included in this is Computerland revenue of $19m which has no comparable amount in the prior period as Computerland was acquired effective 1 September 2005."

"Telecom is targeting double the industry growth in this sector for the full year 2005/06 following the successful integration on Gen-I and Computerland with Telecom's IT business"

4x $249m was close enough to a billion dollars of annualized revenue for me.

However, on inspection of the income statement on page 11 of the third quarter report I see this $249m is a cumulative figure for nine months, and not just a third quarter result as I had assumed by just reading the quoted text. Sorry for any confusion caused and thanks for pulling me up SSR. Nevertheless it looks like IT revenue will hit some $370m for FY2006

On an annualised basis. these figures are up 20% on the prior year. Together with 'broadband and internet' (also up 20%) these are the two 'growth engines' inside Telecom at the moment.

'The point' is that Telecom is not just a decaying carcass ripe for the plucking by competitors. They do have their own growth strategy. Despite the loss in calling revenue, overall revenues within Telecom are not falling.

SNOOPY

Snoopy

22-07-2006, 11:27 AM

quote:Originally posted by duncan macgregor

SNOOPY, When will you ever learn. TEL are in a different situation now, the past is past, you were completely wrong then, as you are now.
TEL must now spend up big to keep us all happy, or stagnate, and down trend. We all think that they charge too much for starters.
Most of the people i know would go to the competition if they had a choice.

Unless you switch to the TelstraClear cable network in Wellington or Christchurch MacDunk you *can't* go to the competition. You can switch from being a retail to a wholesale customer of Telecom for sure. But you cannot go to the competition completely. Unbundling will, if anything, cement the entrenched Telecom monopoly network asset position.

I agree that Telecom will have to up their capital spending, even if it is only for political reasons - to be seen to be doing something. But can they offset this expenditure by cutting costs from the business in other ways (like sending their call centres to Asia)?
And will the consummate increase in business that a more focussed wholesale operation bring reward Telecom like it did with British Telecom in the UK? In the UK there was an increase in business and thus no drop in profits.

quote:
All your fundamental analysis over the years trying to prove that this is a good buy and hold, has been proved wrong over and over. This company is dog tucker, your averaging down will take you with it.

What your binary investment strategy fails to appeciate Macdunk is that even an 'average' company can be a good investment if the entry price is cheap enough. Telecom is certainly likely in a worse position today than it was in a year ago. But is the position 30% worse as the drop in share price would lead you to believe? In my assessment no. I acknowledge even now that it is still *possible* Telecom's performance will deteriorate by 30%. But in my assessment the statistical outlook for Telecom is now something like this:

5% chance of a 30% income boost
10% chance of a 10% income boost
20% chance of flat income performance.
20% chance of a 10% fall in income.
30% chance of a 20% fall in income.
10% chance of a 30% fall in income.
5% chance of a 40% fall in income.

So my 'expected change' in income is:

0.05x+30 +0.1x+10 +0.2x0 +0.2x-10 +0.3x-20 +0.1x-30 +0.05x-40
= -10.5%

Compare this -10.5% to the share price fall of 30% and you will see that from an investment prespective Telecom looks better to me now than it ever has *even though the expected outlook for the business is negative overall*. You don't seem to appreciate that even businesses with a negative outlook can be good investments Macdunk, but you are certainly not alone in that.

Of course, in any business there is always a risk of bankruptcy.
But the only thing that will take Telecom down is if they are forced to sell their services at a loss. The government doesn't want to destroy Telecom. It only wants to ensure that our Telecommunications market is internationally competitive and services are sold for a competitive price. From the international cost benchmarking I have done so far, I don't see a huge amount of fat that can be trimmed from Telecom. We shareholders can at least thank Dr Deane for that (even if it is much harder to forgive his heinous destruction of wealth in multiple failed forays into Australia). In my assessment there will not be the huge collapse in service prices that many expect from increased competition. The outlook for Telecom isn't nearly as bad as Mr Market thinks.

SNOOPY

discl: hold TEL, TLS, BT.A

jonny5

22-07-2006, 12:20 PM

While I think you have a good point Snoop, the public does want Telecoms blood. So while the company may have a higher value than is currently reflected, the conensus of the masses is that regulation will greatly effect Telecom. Truth be told Telecom has known this was coming a *long* time ago. It was a matter of when.

duncan macgregor

22-07-2006, 12:49 PM

SNOOPY, The reason you are completely wrong is very simple to work out. If i had bought TEL at $7-00, i would expect to get back $8-40 Plus dividends one year later, or i would have got out. If i had been silly enough to hold on to them at $6-00 my expected return for the following year would be $10-08. When it gets down to $4-00 and still holding places me in the absolute looney category. I buy shares in companies that must perform, selecting the opportunity of the moment. TEL are a company in a steadily worsening position year by year as the sp will tell you. To hold TEL tells me that you cant find a better safer place for your money to grow your investment portfolio.
TEL might one day be a good buy in the distant future, but surely you have a better place than that to park your money. Why make excuses for a company you have no control over who cares if they go under or not, the idea is to demand the best return for your savings stuff the company who cares?. I feel free to have a go at you we both unlike most others, show our hand. Buy some more PGW thats your best one then add a dash of TPW and a touch of CEN and get out of some of your dogs. your old mate macdunk giving you a rev up.

Bottom Feeder

22-07-2006, 02:05 PM

Well Dunk,
If you have such grandiose perceptions of what returns you want, maybe you shouldnt be investing in the market at all. This is particularly true at this point of time where the market has had its recent boom. The propensity is to go down. Unless you invest in stock that has been oversold, but still a substantial company and competitor such as Telecom.

duncan macgregor

22-07-2006, 02:33 PM

quote:Originally posted by Bottom Feeder

Well Dunk,
If you have such grandiose perceptions of what returns you want, maybe you shouldnt be investing in the market at all. This is particularly true at this point of time where the market has had its recent boom. The propensity is to go down. Unless you invest in stock that has been oversold, but still a substantial company and competitor such as Telecom.
BOTTOM FEEDER, I dont know about you but i hate losing, its win at all costs at everything i do. Play about with bottoms, and you will end up covered in dags my friend, start raising your sights. Who knows you might even start winning, hope you can stand the thought. Why do you think i post my buy and sells?, its to show some of you people with losing attitudes that winning is good, and it gives them some ammo to throw back if i ever get it wrong. You know my buys and sells tell me next year if you still think that i have wasted my time. macdunk

Snoopy

22-07-2006, 03:01 PM

quote:Originally posted by duncan macgregor

SNOOPY, The reason you are completely wrong is very simple to work out. If i had bought TEL at $7-00, i would expect to get back $8-40 Plus dividends one year later, or i would have got out.

$8.40 plus dividends (9.5cpq) means a profit of $1.78 after tax. That is a return of over 25% pa after tax, or 38% before tax. While in a good year this is possible, it is clearly not possible to obtain such returns on an ongoing basis. Thus such a return can only be obtained by 'timing the market' which is something that is dangerous to assume you can always do. Perhaps with a speculative share in the corner of your portfolio, chasing such a deal might be worth such a punt. But Telecom doesn't fall into that category for me.

quote:
If i had been silly enough to hold on to them at $6-00 my expected return for the following year would be $10-08.

Eh? Why if you were satisfied with a 25% return after tax in one year, do you suddenly move your goalposts to require a 74% return the next time around? That makes no sense at all, even if I did agree with your original 25% target.

quote:
When it gets down to $4-00 and still holding places me in the absolute looney category.

At $4, the share price only needs to appreciate to $4.67 (provided annual dividends remain at 38cps) to allow you to claim your 25% target return.

Now which do you think is more likely?

Telecom at $7.00 going to $8.40?

OR

Telecom at $4.00 going to $4.67?

The return is the same, yet one of those options seems a much more likely investment choice than the other. Which would *you* choose?

quote:
I buy shares in companies that must perform, selecting the opportunity of the moment. TEL are a company in a steadily worsening position year by year as the sp will tell you.

Even if what to say is true, the 'steadily worsening position' is providing a fantastic investment opportunity -so long as the market is assuming any profit retracement is much greater than actually occurs. I invite you to consider the following, that even a market follower like you should see some sense in:

1/ The TEL share price has been all over the place between $4 and $5 since the unbundling announcement.
2/ No information has come from Telecom to allow us to make an informed guess of TEL's new value.
3/ So why do you think the market's $4 is a better guess as to Telecom's new value than the market's $5? If I think that Telecom will be $5 by the end of the year, am I out of line with what the market thinks? No.

Are you out of line when you think the Telecom share price will sink to $3? Yes. So why continue to rely on your own investment inklings that are feeding you all this wrong information?

quote:
To hold TEL tells me that you cant find a better safer place for your money to grow your investment portfolio.

Correct. Why do you think I am buying?

[quote]quote:
TEL might one day be a good buy in the distant fu

Snow Leopard

22-07-2006, 03:15 PM

quote:Originally posted by duncan macgregor

Good on you paper tiger nobody is saying SNOOPY should not have an opinion. SNOOPY and i have been debating for years we dont need a ref.
macdunk

I was thinking more along the lines of a slap cross the face with a wet fish for you.
Pass that Whale Shark please.

duncan macgregor

22-07-2006, 04:32 PM

quote:Originally posted by Paper Tiger

quote:Originally posted by duncan macgregor

Good on you paper tiger nobody is saying SNOOPY should not have an opinion. SNOOPY and i have been debating for years we dont need a ref.
macdunk

I was thinking more along the lines of a slap cross the face with a wet fish for you.
Pass that Whale Shark please.

KIPPERS where i come from papery one if you are going to do it do it right. macdunk

winner69

22-07-2006, 04:50 PM

quote:Originally posted by Snoopy

quote:Originally posted by duncan macgregor

[quote]
If i had been silly enough to hold on to them at $6-00 my expected return for the following year would be $10-08.

Eh? Why if you were satisfied with a 25% return after tax in one year, do you suddenly move your goalposts to require a 74% return the next time around? That makes no sense at all, even if I did agree with your original 25% target.

SNOOPY

Snoopy .... how could you not understand the 'time line' thingie

Its 20%pa you fool

Year 1 = $7.00 plus 20% = $8.40 and then ANOTHER 20% for Yrear 2 = $10.08 (plus dividends off course

However Year 2 in case mentioned is academic cause McDumks stop loss would have kicked in

Snoopy ... please take more care in future when reading McDunks posts

duncan macgregor

22-07-2006, 05:04 PM

You are on to it winner69. Please dont try and explain further your only wasting your time.
MACDUNK

Snow Leopard

22-07-2006, 05:17 PM

quote:Originally posted by duncan macgregor

KIPPERS where i come from papery one if you are going to do it do it right. macdunk

I bet you do not even know how a kipper swims, how to catch one or, and this is really important, where the best kippers come from.

regards
Paper Tiger

Enumerate

22-07-2006, 06:06 PM

Winner69, here is a problem for you:

Lets say, that every Monday for a year - you invest your portfolio in a single stock and you sell it again on Friday.

Lets say - the stock you select has an equal probability of going up 60% or going down 40%.

You start with a $10,000 portfolio - what would you expect to end up with at the end of the year (52 weeks)?

duncan macgregor

22-07-2006, 06:27 PM

quote:Originally posted by Paper Tiger

quote:Originally posted by duncan macgregor

KIPPERS where i come from papery one if you are going to do it do it right. macdunk

I bet you do not even know how a kipper swims, how to catch one or, and this is really important, where the best kippers come from.

regards
Paper Tiger

QUESTIONS ARE TO EASY PAPER BOY.
1 KIPPERS IF THEY EVER GO SWIMMING DO IT IN THE WATER.
2, AT YOUR LOCAL IMPORTING FISH SHOP.
3, IN SCOTLAND WHERE ALL THE BEST KIPPERS COME FROM
Thats enough for you to absorb at one sitting papery one. macdunk

winner69

22-07-2006, 07:11 PM

$1,420,429 and 30 odd cents change (assuming the returns were weekly ones)

Emunerate - whats the catch

Enumerate

22-07-2006, 07:53 PM

The expected outcome is your $10,000 will reduce to $3,460!

jonny5

22-07-2006, 08:05 PM

Love to see your calculations for this

Enumerate

22-07-2006, 08:06 PM

Surprising result, yes!

Basically, the reason is that a "geometric mean" is the appropriate measure of expected outcome rather than "arithmetic mean".

Easy way of seeing this is:

Out of the 52 weeks, on average you will make 1.6 (1+0.6) on your money as many times as you make 0.6 (1-0.4) on your money.

The factor that is multipled with your initial investment is:

(1.6^26)*(0.6^26) = (1.6*0.6)^26 = (0.96)^26 = 0.346

1.6 return - 26 times, 0.6 return - 26 times, on average.

Of course, someone who lifts their average of getting the 60% gain over the 40% loss will make a very large amount of money.

Just illustrates the dangers of using arithmetic means in situations where geometric means are appropriate.

If the problem was:

- every week you invested $10,000 in a situation where the investment could go up 60% or down 40% with equal probability

Then an arithmetic mean would be appropriate - you would make 10% on your money.

With the actual problem - someone has a 20% "edge" - but the expectation is you will get about 1/3 of your money back. Sounds very counter-intuitive - but thats the way the numbers work out!

jonny5

22-07-2006, 08:18 PM

Quite right, i misread problem :-]

Bottom Feeder

22-07-2006, 09:32 PM

Thats why chartists and mathematicians dont do well in the sharemarket. A few Harvard mathematicians got together a fund which would be administered using a mathematical formula - They lost the lot in the end.

The problem enumerate is whether you make a 1.6 return in the first week and a preponderance of 1.6 returns in the early weeks and that the 40% losses occur a bit further down the line and not in the first week.

NO place for mathematics in investing.

winner69

22-07-2006, 10:24 PM

That why you call yourself emunerate eh emunerate?

I could be a bad loser and say many would disagree with you .... depending on how one intreperts the problem.

Your assumption is that there will be 26 good weeks and 26 bad weeks .... my assumption was that Week 1 there 'is an equal probability of going up 60% or going down 40%' ..... and then same for Week 2 and so on ....... ie each week has it's own outcome and is not dependent upon the result of any previous week

We solved 2 different problems .... both correctly?

Your way of looking at it does highlight the real impact of losses .... one cannot afford them can we.

Just like a group of fund managers .... the one who makes average returns every year will probably end up as the best fund manager over a period of time

Interesting

Snoopy

22-07-2006, 10:46 PM

quote:Originally posted by Enumerate

Surprising result, yes!

Basically, the reason is that a "geometric mean" is the appropriate measure of expected outcome rather than "arithmetic mean".

Easy way of seeing this is:

Out of the 52 weeks, on average you will make 1.6 (1+0.6) on your money as many times as you make 0.6 (1-0.4) on your money.

The factor that is multipled with your initial investment is:

(1.6^26)*(0.6^26) = (1.6*0.6)^26 = (0.96)^26 = 0.346

1.6 return - 26 times, 0.6 return - 26 times, on average.

Of course, someone who lifts their average of getting the 60% gain over the 40% loss will make a very large amount of money.

Just illustrates the dangers of using arithmetic means in situations where geometric means are appropriate.

Two points Ennumerate.

1/ Your problem is interesting. Your point on using the 'geometric mean', that is multiplying the results of each successive investment trial together is well made. But what on earth has it got to do with investing in Telecom? No-one here is advocating buying and selling shares in Telecom every week are they?

2/ The second point is that I think you have your maths wrong. What a person can 'expect' to get is not 'the average return' that you have carefully worked out. Instead it is the average return of *all possible scenarios*, which is a different thing.

To illustrate what I mean, I will simplify your problem a bit. The probabilities of gain and loss remain the same at 0.5 each, and the amount of each gain (+60%) and loss (-40%) also remains the same. But instead of 52 weeks let us reduce the problem to a much shorter timeframe - just two weeks. There are only four possible outcomes in such an investment trial:

i/a gain in both weeks, (1.6)(1.6)=2.56
ii/ a gain and a loss, (1.6)(0.6)=0.96
iii/ a loss and a gain, (0.6)(1.6)=0.96 or
iv/ two weeks of losses.(0.6)(0.6)=0.36

Your expected return is therefore (2.56+0.96+0.96+0.36)/4= 1.26

or a 26% gain on your inital investment.

By contrast the 'average return' using your method of assuming a loss one week and a gain the next is (0.6)(1.6)=0.96. The calculated expected loss of 4% using this method is an incorrect answer as I see it.

SNOOPY

Enumerate

22-07-2006, 11:02 PM

Couple of points:

- if I "lost" 26 times in a row (0.6) and then "won" 26 times in a row (1.6) the result would be the same compared with if I had "won" then "lost" which is also the same result as if the "wins" and "losses" were randomly interspersed. The only key factor is the total number of times I won and lost. If I have an equal probability of winning or losing - that average result is 26/26 over 52 weeks.

- Winner69, you are correct to point out that the effect of losses is devastating on return even though the gain percentage is greater. In the case of the example - despite a 20% differential in the rate of return (in favour of "winning" - on average), the overall return from the experiment is terrible.

My point in posting this was to (gently) council support for the Snoopy point of view. An investor who accepts a lower per period bias - but also less difference between winning and losing - will get a better return. This could be as simple as focusing on a dividend yield, for example.

Consider this:

"winning" is up 30% (compared with 60%)
"losing" is down 20% (compared with 40%)
over the 52 weeks

Average return is $27,725 on the $10,000 investment! Much better than the losses, before.

This situation could be a model for buying a high dividend stock, which, when it rises - does half as well the the other one, but when it falls - it falls half as much.

Enumerate

22-07-2006, 11:36 PM

Snoopy, if you "won" 52 times, your return would be:

1.6^52 = 41137613933

Your $10,000 would turn into $411,376,139,330,000.00

If you "lost" 52 times, your $10,000 would turn into something close to zero - your loss would be -$10,000.

Hence, returning to the difference between the geometric mean and the arithmetic mean - the question is not to ask "what is the average return of all the states" - it is the question "what is the return of the state that I will occupy, on average".

In the original example, this is a loss making position. In fact, if a large number of people performed the trial, half of them would do worse than you; half would do better. It is true that the rewards of doing better are much more significant than the penalty involved with doing worse (losing $10k vs gaining $411trillion) - but, none the less, the state you would expect to occupy would be a loss making one.

BRICKS

23-07-2006, 02:39 AM

WITH all this winning & losing going on which company are we talking about,, life should be SIMPLE.. [8D]

winner69

23-07-2006, 08:11 AM

quote:Originally posted by Enumerate

Snoopy,

If you "lost" 52 times, your $10,000 would turn into something close to zero - your loss would be -$10,000.

To bring some relevance to this thread in the case of 'losing' all the time after selling your portfolio in Week 16 you wouldn't have anough left to buy 1 TEL share the next Monday

(However you could get back through to Week 24 before you wouldn't have enough to buy even 1 CER share, excluding and brokerage))

winner69

23-07-2006, 08:20 AM

quote:Originally posted by Bottom Feeder

Thats why chartists and mathematicians dont do well in the sharemarket.
NO place for mathematics in investing.

Load of codswallop me old mate

At least chartists (like Phaedrus) know

- you need to have more +ve trades than negative trades ....

- you maximise/optimise the returns from +ve trades

- you contain the -ve trades with certain pre-set limits

Isn't that all mathematics ... ie emunerate's problem put another way

Seems a better approach than trying to pick the bottom based on fundamentals which is another form of mathematics anyway.

winner69

23-07-2006, 10:17 AM

Enumerate does raise a good point about using simple (arithmetic) averages

Take the long term performance of the DOW for instance from 1900 to 2005 (105 years)

The (aritmetic) average return has been 7.3% pa .... but on a compounding basis the return has been 4.9% pa

Big difference eh

But

Enumerate

23-07-2006, 10:42 AM

Consider an investment in a "MacDunk" fund - in grossly simplified terms:

- you invest with an expectation that your pick will go up 20%
- you put a stop loss in place, in the event things go wrong that costs you 5%
- there is an equal probability of either event happening

What is you expected return over 2 years, say.

(This was the essence of the TEL.NZX discussions that prompted the geometric mean post)

Answer: 1.2*0.95 = 1.14; or 7% per year over the two years "arithmetic mean".

Now consider the "Snoopy" fund. This fund invests in a high yeild stock with no expectation of capital gain nor capital loss.

- the fund invests in a stock with an almost 7% dividend yield

What is the return on investment over two years?

Answer: almost 7% compounded over two years = 1.14; or 7% per year over the two years "arithmentic mean".

Hence the MacDunk fund and the Snoopy fund produce the same yeild, over two years. The MacDunk fund needs the 20% return to offset the potential 5% loss. The Snoopy fund needs only almost 7% (about the yeild of TEL.NZX) to match this return.

Consider the following question:

Which fund will do better over 10 years?

BRICKS

23-07-2006, 10:46 AM

ALL this talk is a load C###.. [8D]

Enumerate

23-07-2006, 10:54 AM

I have just realised, from discussions above, that calculation of yeild using the geometric mean supports some key principles of Buffettology:

- Warren rails against the small expenses of investing - getting out with small losses due to fees, stop losses etc. He, basically, takes the view that you should be satisfied with the expectation of a much lower yeild from your investment but should focus on risk minimisation at all costs. The cost of suffering a frequent 5% loss is only outweighted by an equal probability very significant gain.

- The market is not efficient - through research you can identify investment opportunities that, first of all, will preserve you capital and, secondly, offer the expectation of a return.

- Warren is not a market timer. He takes his investment opportunities when he sees them - not when he believes the market is about to turn bullish. Hence his taking of some profitable investments in sectors that are viewed as "top of market".

Warren's system is the most rational approach to the properties of the geometric mean! I wonder if this has been pointed out before?

duncan macgregor

23-07-2006, 11:05 AM

quote:Originally posted by Enumerate

Consider an investment in a "MacDunk" fund - in grossly simplified terms:

- you invest with an expectation that your pick will go up 20%
- you put a stop loss in place, in the event things go wrong that costs you 5%
- there is an equal probability of either event happening

What is you expected return over 2 years, say.

(This was the essence of the TEL.NZX discussions that prompted the geometric mean post)

Answer: 1.2*0.95 = 1.14; or 7% per year over the two years "arithmetic mean".

Now consider the "Snoopy" fund. This fund invests in a high yeild stock with no expectation of capital gain nor capital loss.

- the fund invests in a stock with an almost 7% dividend yield

What is the return on investment over two years?

Answer: almost 7% compounded over two years = 1.14; or 7% per year over the two years "arithmentic mean".

Hence the MacDunk fund and the Snoopy fund produce the same yeild, over two years. The MacDunk fund needs the 20% return to offset the potential 5% loss. The Snoopy fund needs only almost 7% (about the yeild of TEL.NZX) to match this return.

Consider the following question:

Which fund will do better over 10 years?

LOAD OF CODSWALLOP. MACDUNK has only had one loser in the last three years, and even that is ending up a winner. Bought and sold NZO a couple of times for a 12 pc gain then a lesser ammount the second time. Bought back in at an average of $1-18 which was the mistake then sold the free options for 9.5c, which brought my initial price back to respectability. The option money i bought PPP at 13c and sold at 20c then bought HQP at $1-14 average now $1-17 i think. That is my one mistake if you could call it that. SNOOPY bought TEL which is only one mistake of many, and averaged down. What about all my winners why dont you dig them out if you want to judge my system, its all open for all to see. Incidentely my 20pc timeline is a guide, not a rigid requirement, it only lets me know if i am wasting my time. macdunk

jonny5

23-07-2006, 11:11 AM

A powerful virtual reality will offer both options - to immerse AND to step out and view the scenario from a distance. In "real" life, wouldn't it be very helpful to step out of a situation you're in so you can examine it from a safer, more objective distance? In virtual reality - especially scenarios that are especially arousing or disorienting - the ability to process the scene from a third person view might be very useful. Psychologists call it an "observing ego."

*coughs*

hittin any marks?

Deev8

23-07-2006, 11:12 AM

quote:Originally posted by Enumerate

The expected outcome is your $10,000 will reduce to $3,460!

Assuming of course that the 52 buy transactions and 52 sell transactions have zero cost.

Enumerate

23-07-2006, 11:22 AM

MacDunk - clearly, it you have a stock picking/timing "edge" - your portfolio return will be significantly higher using your trading strategy than using a Snoopy strategy.

Again, the geometric mean gives insight into this:

- you invest with twice the chance of making 20% compared with the chance of losing 20%
- you invest over three years

The geometric mean return is:

1.2*1.2*0.8 = 1.152

The situation where the 20% gain is equal to the loss - results in a loss situation.

If you can do 3:1, 4:1 etc - the returns get exponentially better!

About the only point I wish to make is that investors should understand when to apply a geometric mean. Applying an arithmetic mean, inappropriately, can cause you to lose significant amounts of money.

I'll go back to my table of logarithms, now. Those who knew about geometric means are now getting bored by my posts, those who don't wish to know are now getting agitated.

PAX :D

warthog

23-07-2006, 11:24 AM

quote:Originally posted by duncan macgregor

Incidentely my 20pc timeline is a guide, not a rigid requirement, it only lets me know if i am wasting my time. macdunk

Interestingly, MacDunk's competitive advantage is that, like the tea-lady, nobody can follow MacDunk's "system" as it has far too many hunches and non rigid requirements. If MacDunk defines all these unknowns, we'd all be rich and be on holiday in California or some such exotic location.

warthog

23-07-2006, 11:26 AM

quote:Originally posted by Bottom Feeder

Thats why chartists and mathematicians dont do well in the sharemarket. A few Harvard mathematicians got together a fund which would be administered using a mathematical formula - They lost the lot in the end.

The problem enumerate is whether you make a 1.6 return in the first week and a preponderance of 1.6 returns in the early weeks and that the 40% losses occur a bit further down the line and not in the first week.

NO place for mathematics in investing.

Interesting view. I think you'd find a significant number of (sucessful) mathematics/chartist investers who would be happy for you to perpetuate this opinion - more on the table for them.

warthog

23-07-2006, 11:32 AM

quote:Originally posted by BRICKS

WITH all this winning & losing going on which company are we talking about,, life should be SIMPLE.. [8D]

Simple life starts with simple communication. That is, words strung together so that other people can understand.

winner69

23-07-2006, 11:34 AM

quote:Originally posted by Enumerate

I'll go back to my table of logarithms, now.

... haven't you graduated to a slide rule yet eumerate

Whats a 'slide rule' many will ask

foodee

23-07-2006, 11:55 AM

Winner 69
Is it a 'slide rule' when the uptrend is broken?[}:)]:D

Bottom Feeder

23-07-2006, 03:23 PM

Just a further spanner in the works. Not many can stick to purely mathematical investing. The psychology of human behaviour will mean that if one is losing too much instead of backing the system they will change their investment decisions. Similarly if one is winning with the system, it will come to a point that an emotive desision will come into play which will change the whole scenario.

Gut feeling and experience come into play when buying Tel at $4-00

Snoopy

23-07-2006, 05:14 PM

quote:Originally posted by Enumerate

It is true that the rewards of doing better are much more significant than the penalty involved with doing worse (losing $10k vs gaining $411trillion) - but, none the less, the state you would expect to occupy would be a loss making one.

Enumerate, your statement is correct, but nevertheless I don't agree with your point that the state you can expect to occupy is what matters. Here is a little story from the book 'Fooled by Randomness' by Nassim Nicholas Taleb (p95 from the second edition). He is a much better orator than I am so you should find it amusing, and you may even learn something from it.

"When I was in employment of the New York office of a large investment house, I was subjected on occasions to the harrying weekly discussion meeting, which gathered most professionals of the New York trading room. I did not conceal that I was not fond of such gatherings, and not only because they cut into my gym time. While the meetings included traders, that is people who are judged on their numerical performance, it was mostly a forum for salespeople (people capable of charming customers) and the category of entertainers called Wall Street 'economists' or 'strategists' who make pronouncements on the fate of markets, but do not engage in any form of risk taking thus having their success depend on rhetoric rather than actually testable facts. During the discussion people were supposed to present their opinions on the state of the world. To me the meeting was pure intellectual pollution. Everyone had a story, a theory and insights that they wanted to share. I resent the person who, without having done much homework in libaraies, thinks he is onto something rather original and insightful on a given subject matter (and respect people with scientific minds like my friend Stan Jonas who feel compelled to spend their nights reading wholesale on subject matter, trying to find out what was done on the subject by others before emitting an opinion- would the reader listen to the opinion of a doctor who does not read medical papers?)

I have to confess that my optimal strategy (to soothe my boredom and allergy to confident platitudes) was to speak as much as I could, while totally avoiding listening to other peoples replies by trying to solve equations in my head. Speaking too much would help me clarify my mind, and, with a little bit of luck, I would not be invited back (that is, forced to attend) the following week.

I was once asked in one of those meetings to express my views on the stock market. I stated, not without a modicum of pomp, that I believed that the market would go up slightly over the next week with a high probability. How high? "About 70%." Clearly that was a very strong opinion. But then someone interjected
"But Nassim, you just boasted being short on a very large quantity of SP500 futures, making a bet that the market would go down. What made you change your mind?"
"I did not change my mind! I have a lot of faith in my bet (audience laughing). As a matter of fact I now feel like selling even more."
The other employees in the room seemed utterly confused.
"Are you bullish or bearish?" I was asked by the strategist. I replied that I could not understand the words 'bullish' or 'bearish' outside of their purely zoological consideration. My opinion was that the market was more likely to go up ("So I would be bullish"), but that it was preferable to short it ("So I would be bearish"), because in the event of its going down, it could go down a lot. Suddenly , the few traders in the room understood my opinion and started voicing similar opinions. And I was not forced to come back to the following discussion." Nicholas Taleb

as quoted by

SNOOPY

BRICKS

23-07-2006, 05:17 PM

quote:Originally posted by warthog

quote:Originally posted by BRICKS

WITH all this winning & losing going on which company are we talking about,, life should be SIMPLE.. [8D]

Simple life starts with simple communication. That is, words strung together so that other people can understand.

wartie good to hear from you again,, are you still that DUMB KIWI fellow that you told me ABOUT.. [8D]

warthog

23-07-2006, 08:45 PM

quote:Originally posted by BRICKS

quote:Originally posted by warthog

quote:Originally posted by BRICKS

WITH all this winning & losing going on which company are we talking about,, life should be SIMPLE.. [8D]

Simple life starts with simple communication. That is, words strung together so that other people can understand.

wartie good to hear from you again,, are you still that DUMB KIWI fellow that you told me ABOUT.. [8D]

Start slowly, Bricks. A short word or two in the beginning, and work your way up from there. You're confusing yourself by tackling too much too early. So scale it back, and add more as your communication skills are honed.

It won't happen overnight, but it will happen!

At least, that's how the ad goes ;)

BRICKS

23-07-2006, 09:04 PM

quote:Originally posted by warthog

quote:Originally posted by BRICKS

quote:Originally posted by warthog

quote:Originally posted by BRICKS

WITH all this winning & losing going on which company are we talking about,, life should be SIMPLE.. [8D]

Simple life starts with simple communication. That is, words strung together so that other people can understand.

wartie good to hear from you again,, are you still that DUMB KIWI fellow that you told me ABOUT.. [8D]

Start slowly, Bricks. A short word or two in the beginning, and work your way up from there. You're confusing yourself by tackling too much too early. So scale it back, and add more as your communication skills are honed.

It won't happen overnight, but it will happen!

At least, that's how the ad goes ;)

WHAT company are you talking about wartie, So muddy & So smelly , So dumb, Regards.. [8D]

Snoopy

23-07-2006, 11:17 PM

quote:Originally posted by Enumerate

I have just realised, from discussions above, that calculation of yeild using the geometric mean supports some key principles of Buffettology:

I see that as well as your mathematical prowess Enumerate, you are also an archer of some note, and a particular master at drawing the long bow....

quote:
- Warren rails against the small expenses of investing - getting out with small losses due to fees, stop losses etc. He, basically, takes the view that you should be satisfied with the expectation of a much lower yield from your investment but should focus on risk minimisation at all costs. The cost of suffering a frequent 5% loss is only outweighted by an equal probability very significant gain.

I don't think Warren is 'satisfied' with a low yield. I think Warren benchmarks his returns against historical returns for the market to keep his investment goals realistic. I don't know what this frequent 5% loss you talk about is. AFAIK there no such observation has ever been made of a frequent 5% loss on Warren's investments

quote:
- The market is not efficient - through research you can identify investment opportunities that, first of all, will preserve you capital and, secondly, offer the expectation of a return.

Yes, but this has nothing to do with the idea of the geometric mean does it?

quote:
- Warren is not a market timer. He takes his investment opportunities when he sees them - not when he believes the market is about to turn bullish. Hence his taking of some profitable investments in sectors that are viewed as "top of market".

Yes, but again nothing to do with the idea of a geometric mean

quote:
Warren's system is the most rational approach to the properties of the geometric mean! I wonder if this has been pointed out before?

No, because I don't think it is true. The idea of the geometric mean is useful when you take one investment, completely sell out of it and then invest the proceeds in a new investment. That is not how Warren invests. Warren tends to hold the same investments over many years and AFAIK never trades in and out of them. That makes the 'geometric mean' as a method of measuring Warren's investment performace largely redundant.

SNOOPY

duncan macgregor

24-07-2006, 09:57 AM

I think all this has nothing to do with the expected returns from telecom. The obvious facts of the sp was that it was on a prolonged downtrend for all to see, with an ever worsening position. Anyone holding only has to look in the mirror to see who the fool is.
Surely there were better and safer places in the market to place your hard earned cash than this. The so called WARREN BUFFET disciples really have a lot to learn about common sense investing proceedures.
Telecom are in a very bad position, growing worse by the day. Yesterdays profits are yesterdays profits, tomorrows profits have still to be won. I never got round to reading BUFFETS books which no longer interest me, his disciples showed me that i have a much better system for my little place in the market.
What intriques me is the bad companies that those people buy into in the first place. Surely by going into a companies records WB style you would come up with a winner now and again, not a succession of losers. macdunk

warthog

24-07-2006, 05:45 PM

Telecom turned up today to sort out the second fault in as many months. The embarassed tech - when I asked him why the network and cabling is such a shambles - said he's looking forward to a shake-up in the telecom sector here, as he's sick of patching up patched-up botch jobs where instead of spending an extra fifteen minutes fixing something properly, they are under such constraint that they just do as much as they need to in order that the fault is gone - for now. Last time I suggested he replace a 4m length of cable that rusty staples had eaten into. He didn't have time to do it last time, but did so this time, because that't what fixed the fault (wild-blown rain entering the cable).

Go figure. Telecom is uninterested in maintaining anything other than patching it up to keep the boat from sinking.

All the warthog can say is that this is consistent with the spin that TEL has produced over the last decade.

Apparently nothing has changed since events of late - the people at the coal face proceed as usual.

Bobby_Fischer

24-07-2006, 07:12 PM

I thought Telecom had contracted their fault service out?

warthog

24-07-2006, 08:18 PM

quote:Originally posted by Bobby_Fischer

I thought Telecom had contracted their fault service out?

To clarify, the engineer was representing Telecom. They had a van with the TEL logo on it, and they handed out a card with the TEL logo on it.

beacon

25-07-2006, 11:23 AM

Maintenance was farmed out to the likes of Transfield a couple of years ago, and word is that Telecom screwed them

Bobby_Fischer

25-07-2006, 04:15 PM

Presumably they "won" a competitive tender process (GDC lost?)? A case of "be careful what you wish for, you might get it". So more likely a disaffected sub-contractor working to rule (and bad-mouthing the contractee), rather than Telecom being uninterested in maintaining anything? If it's worth the bother, perhaps a complaint higher up the food chain would improve service to the warthog's wallow.

Halebop

25-07-2006, 05:18 PM

The lowest bid, qualitative KPI's and the sub-contractor's profit motive are pretty much mutually exclusive. Outsourcing works best where there are economies to be gained and a contested market for provision. TEL's methodology for letting of the contracts did little to foster a local contracting industry or competition. Perhaps their own inability to operate in a competitive environment coloured their thinking.

Overall I suspect their methods created the opposite conditions and outcomes that are ideal for outsourcing and their own infrastructure.

Bobby_Fischer

25-07-2006, 05:28 PM

Can't the user opt out anyway, by taking on their "wire maintenance contract" for themselves (from the roadside terminal)?

BRICKS

25-07-2006, 08:52 PM

MEANWHILE wartie looks at his 4m of cable and cry`s and the rest of the MOB talk about the price of fish down at the NZX. Commonwealth Bank spends millions BUYing 8.03% of TEL now that's a real STORY best approx price around $4.28 very rough ,, They know when there on to a GOOD THING.. [8D]

warthog

25-07-2006, 10:00 PM

quote:Originally posted by BRICKS

MEANWHILE wartie looks at his 4m of cable and cry`s and the rest of the MOB talk about the price of fish down at the NZX. Commonwealth Bank spends millions BUYing 8.03% of TEL now that's a real STORY best approx price around $4.28 very rough ,, They know when there on to a GOOD THING.. [8D]

"wartie" is well capable - for what it is worth - of taking care of his own cabling should it come to that.

It's not rocket science - even BRICKS could sort out simple problems.

"very rough" is what TEL's own work was like at the end of the 1980s, and as far as the "network" is concerned, nothing looks like it has changed. The warthog saw it with his own eyes, and was even laying some cable in Herd Street for Telecom to pick up a few bucks in his early university days.

warthog

25-07-2006, 10:03 PM

quote:Originally posted by Bobby_Fischer

Can't the user opt out anyway, by taking on their "wire maintenance contract" for themselves (from the roadside terminal)?

Not as the warthog understands - it is up to the point where the cable exits your house.

Not that the warthog would mind getting his hands on that bit of cable between his house and the cabinet. Lots of fun to be had in the cabinet too.

Imagine if MacDunk could get access to his cabinet? His neighbours would be without telephone service for months - the experience might remind MacDunk of the boy-scout days with wee tents, etc.

BRICKS

25-07-2006, 10:24 PM

BUT the big NEWS is "WHICH BANK" known as Commonwealth Bank of AUSTRALIA has bonked yet again NZ biggest public company they mite BUY the lot and SELL it to TLS.. [8D]

lanenz

26-07-2006, 03:19 AM

Got a long way to go there Bricks. Even if Tel did go to overseas interest then the new owners are even in a more precarious position. ie the government (god bless them) can regulate the telecom industry further. Having said that, im sure Ralf Norris has a contact or 2 that can help his cause.

777

04-08-2006, 09:32 AM

Announcement this morning shows large loss due to write downs.

Dividend 7c plus 5c special.

Gryffyn

04-08-2006, 09:50 AM

$435m June year net loss for Telecom
04 August 2006

BREAKING NEWS - 9.05am
Telecom today announced a $435 million net loss for the year to June 30 and a fourth quarter loss of $191m.

Last year the company reported a June year net profit of $967m.

For the third quarter, Telecom posted a net loss of $222m after a massive $897m writedown in the value of Australian unit AAPT.

Today, it said it had written down the value of AAPT to $A270m ($NZ335m). It originally paid over $2 billion for the troublesome unit.

Telecom announced a 7 cents per share final dividend, down from the 9.5 cents in the first three quarters. A special dividend of 5cps, previously announced, will also be paid.

The company said it would now aim to pay out 75 per cent of net profit in dividends against a previous target of 85 per cent.

The company said its adjusted full year profit before unusual items (mainly the AAPT writedown) was $820m.
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The company, whose share price plunged to a 13-year low of $3.97 last month in the wake of the government decision on May 3 to force Telecom to open its network to broadband rivals, said it would increase its capital expenditure to $800m for 2007. Telecom's shares had been at $5.75 before the decision and closed yesterday on $4.23.

Chairman Wayne Boyd said the extra investment of $50m would accelerate Telecom's transformation "as we realign the company to meet fast-changing customer and market needs".

On shareholder distributions, Mr Boyd said new dividend policy was post a depreciation adjustment associated with the AAPT writedown.

Accordingly, interim dividends will be set at 7c per share for the first three quarters of 2006/2007 and the last quarter dividend will depend on the final profit result.

Telecom will reintroduce a 3 per cent incentive for shareholders who choose to reinvest their dividends in Telecom.

Mr Boyd said Telecom remained committed to its "A" credit rating and associated long-run target gearing ratios.

"This is consistent with an efficient capital structure that minimises group weight average cost of capital (WACC) and retains sufficient financial flexibility to absorb variability in earnings, capital expenditure and market-wide rating shocks while still allowing access to capital markets," Mr Boyd said.

Chief executive Theresa Gattung said Telecom was transforming to meet the new regulatory environment.

"There are some big challenges to navigate, that's clear," she said.

"We have separated our retail and wholesale business and made a commitment to sharing technical information, performance statistics and investment plans with the industry."

Ms Gattung said Telecom also proposed that the wholesale operation would be monitored by an Independent Oversight Group (IOG). It would be underpinned by a range of legally binding undertakings including:

# Commitment to non-discrimination
# IOG to monitor and report against undertakings
# Audited review of performance against undertakings
# Separate incentives for the wholesale business that support delivery of undertakings
# High degree of transparency.

Ms Gattung said in the consumer business, Telecom was focussing on driving broadband penetration, developing fixed line to mobile convergence capability and simplifying the product mix while improving customer service.

"In business, we are bringing together the New Zealand business market with our Australian managed customers into a single business entity.

The company forecast 2007 net profit of around $820-$860m with NZ earnings before interest, tax, depreciation and amortisation (ebitda) and Australian earnings static.

For the fourth quarter, AAPT was written down by a further $404m to bring the full year writedown to $1.29 billion.

The carrying value of the Australian operations reflected "the challenging operating conditions in the Australian market with retail prices declining and wholesale prices rising".

Ms Gattung said New Zealand operations had performed solidly in the June 2006 quarter, with

Major von Tempsky

04-08-2006, 10:27 AM

I'm happy, I bought it as an income stock and its performing that function admirably. Gryffn forgot to mention the small rise in Tel's gross income.
No changes in my lifestyle - I'll be off to Nelle Calédonie and la Belle France encore!

duncan macgregor

04-08-2006, 10:31 AM

It makes you wonder at the stupidity of the people with shares in a company like that. It pays over a million bucks a year salary to the person in charge of a disaster like that. I see the sp downtrending to $3-00 in the next couple of years. MACDUNK

troyvdh

04-08-2006, 10:45 AM

MVT..........are you taking the mickey out of those poor sods who really do hold TEL or what.

shasta

04-08-2006, 10:49 AM

EBITDA up 2.7% for the year (4.1% for the quarter)

Showing there is some growth, albeit slight so not all bad though, & those holding for the divvies will be reasonably happy.

If the 75% ratio = 7cps per quarter = 28 + 10cps special = 38cps each year + Imp credits so 0.57/4.15 (current sp) = yield of over 13%

Disc: Do not hold, never have, never will & personally EBITDA as a measuring stick is limited!

Halebop

04-08-2006, 11:26 AM

The EBITDA numbers are historical and meaningless in TEL's new world. They are facing an increase in the "D" part of the equation thanks to high Capex. They are facing a decrease in the "E" part of the equation because they will have to give away some retail margin to competitors for the "bitstream" portion of the line rental. Even if they get to keep 90% of the retail price as the wholesale componant, the 10% comes straight off the bottom line. Worse though, with increased competition gathering at the competed "bitstream" end, this will further erode historical revenues like voice "valued added" services like voice mail, caller ID and of course toll revenues.

Stretching out the time frames and winning as many broadband customers as possible will be the name of the game.

Gryffyn

04-08-2006, 11:36 AM

quote:Originally posted by troyvdh

MVT..........are you taking the mickey out of those poor sods who really do hold TEL or what.

no, he's a big holder in denial - lost heaps of capital and now reduced divvies but cognitive dissonance has kicked in and he is congratulating himself for being poorer!

Deev8

04-08-2006, 05:16 PM

Mr_Market

04-08-2006, 06:58 PM

quote:Originally posted by shasta

EBITDA up 2.7% for the year (4.1% for the quarter)

Showing there is some growth, albeit slight so not all bad though, & those holding for the divvies will be reasonably happy.

Minus 4% for inflation = -1.3%, so that's a loss you have there in real terms. Thats not growth stock in my book.

shasta

04-08-2006, 07:11 PM

Too true Mr Market, the inflation factor had totally escaped me, & i see TG on TV3 tonight saying how wonderful Telecom is doing & how well placed they are.

Lets see how long it takes to slip down to $3 as macdunk claims it may do.

Mr_Market

04-08-2006, 07:35 PM

Yep, 4% is a big hurdle to get over. No wonder the reserve bank is mandated to keep it below 3% ;)

beacon

07-08-2006, 10:18 AM

Not the best result, but still can't see $3. Have offloaded a third after result though, as $3.5 looks more and more likely. But can't fathom why I won't offload all holdings complately. Introspecting ...

warthog

07-08-2006, 10:24 AM

The warthog would like to nominate MacDunk as the next CEO of TEL. He seems to have a better idea of where the company is going than TG does.

ananda77

07-08-2006, 10:53 AM

...can't really see the problem holding TEL at current prices.

...seems that at least for another year, holding shares in TEL will pay currently ~13.00%

...hedging the downside with shorting the share, the investor will earn another 4% on invested capital with a 5% margin

...that's ~17% return/annum with no risk to invested capital

Kind Regards

beacon

14-08-2006, 10:11 AM

cheers ananda

Snoopy

16-08-2006, 02:47 PM

quote:Originally posted by shasta

Showing there is some growth, albeit slight so not all bad though, & those holding for the divvies will be reasonably happy.

If the 75% ratio = 7cps per quarter = 28 + 10cps special = 38cps each year + Imp credits so 0.57/4.15 (current sp) = yield of over 13%

Shasta, a special dividend means a one off that is not expected to be repeated. That is why TEL distinguish it using the adjective 'special'. So your implication that Telecom will continue to pay special dividends into the future cannot be taken seriously.

Telecom still has 5c of the already declared special 10c special dividend to pay out for the *last* financial year. That means the correct method for calculating the dividend yield is to take that imminent 'one off' payment off the current share price ($4.15-5c=$4.10), and use the $4.10 figure to work out the future yield, based on the new declared dividend rate of 7cps per quarter.

4x7c/410= 6.8% after tax or 6.8%/(1-0.33)=10.2% (equivalent to 41.8cps) IF you include imputation credits based on a tax rate of 33%.

If you are on a marginal tax rate of 39%, then you have to pay an additional (39-33)/33=18.18% tax on any income you get from Telecom shares. That means an extra tax liability of 0.1818 x28c= 5cps per year.

That gives a gross yield of (41.8-5)/410= 9.0%. That is still more than double the after tax bond rate for the 39% taxpayer. Any way you look at the income yield figures, you just can't make them look shabby.

quote:
Disc: Do not hold, never have, never will

Excellent. The more irrational investors there are out there, the more time I have to gather my funds up to buy more TEL shares!

SNOOPY

discl: hold TEL, and will continue to accumulate.

shasta

16-08-2006, 03:10 PM

Snoopy

I had assumed the 10cps special dividend would continue this current year, thanks for correcting me, though you make the same point, in the end that TEL as an income share is not too bad.

Would suggest those on the marginal tax rate of 39%, transfer there holdings into a company though!

I'll let macdunk & others argue the merits of your last statement!

duncan macgregor

16-08-2006, 05:20 PM

quote:Originally posted by Snoopy
Excellent. The more irrational investors there are out there, the more time I have to gather my funds up to buy more TEL shares!

SNOOPY
discl: hold TEL, and will continue to accumulate.

SNOOPY I see you have learned absolutely nothing about averaging down. Will you buy more when they trend down to $3-00?.
Stick it all in the bank the market is not for you, you had better ask MVT to join you before you both lose the lot. macdunk

HarryFlashman

17-08-2006, 12:44 PM

Job cuts part of the plan ....

The job cuts I'll be cheering for will be the removal of the current CEO and her hopeless lackeys. This bunch of idiots have achieved nothing over the six years of their reign. Market trends are outside their control but the organisation's loathsome arrogance and flabby complacency could and should have changed years ago.

They have stuffed up big time. Useless, overpaid blowhards every one.

As for the rest of TEL staff - this company is a classic example of an organisation where about 25% of the staff could be got rid of tomorrow and the company would probably perform better. At the very least such drastic action would encourage those that remained to do a decent day's work.

As it is we will see yet more foot-dragging and have to endure months of having our intelligence insulted with one pathetic excuse after another.

Cheers
Harry

ananda77

17-08-2006, 03:45 PM

Harry Flashman:

...sorry to bother you, but I think your statement about TEL is unfair.

-who is a competent person to direct TEL?

-T-coms have been and still are in trouble all over the place, not just in New Zealand

-are all CEO's of T-coms therefore incompetent???

Kind Regards

Snoopy

18-08-2006, 12:38 AM

quote:Originally posted by Halebop

The EBITDA numbers are historical and meaningless in TEL's new world. They are facing an increase in the "D" part of the equation thanks to high Capex. They are facing a decrease in the "E" part of the equation because they will have to give away some retail margin to competitors for the "bitstream" portion of the line rental. Even if they get to keep 90% of the retail price as the wholesale component, the 10% comes straight off the bottom line. Worse though, with increased competition gathering at the competed "bitstream" end, this will further erode historical revenues like voice "valued added" services like voice mail, caller ID and of course toll revenues.

I am still struggling to come to terms with what Mr Market sees as the problem with Telecom. I take on board the points that Halebop has mentioned above. But I don't necessarily agree with the way he sees them panning out.

Depreciation: Telecom has indicated that capital spending will be boosted by $50m per year as a result of local loop unbundling. Even if all of that new investment is written off in only five years, the bottom line will be hit by only $10m per year - the profit is hardly dented!

Earnings: 'The belief' is that Telecom are overcharging everyone like crazy. The usual trick to justify overcharging is to overvalue your assets and then claim that you need to charge high prices to earn a fair return on those assets. However, my extensive comparison between duct and wire asset lives between the European norm and the life that Telecom claims indicates (see British Telecom thread on the Focus Investment Group on the other channel) shows that Telecom are not overvaluing their network assets.

Furthermore my rolling comparison of net profit declared over 5 years verses capital expenditure over that same period shows that a reasonable balance has been struck there too. In short I can't find any evidence that Telecom are earning excessive profits given the level of capital expenditure they face. But let's assume Telecom are ordered to reduce wholesale line access prices by 10%, just for the hell of it. Why would voice mail revenues and caller ID revenues fall in sympathy?

And why do people assume that all the new revenue gathering ideas ( e.g. TV down the phone line) will flop? I am trying to construct a devils advocate argument against Telecom. But when I try to put some real numbers against all the negative hype, those numbers just don't stack up.

quote:
Stretching out the time frames and winning as many broadband customers as possible will be the name of the game.

The drop in FY2006 last quarter earnings reflects exactly this strategy - Telecom are trying to establish themselves as the natural supplier of broadband in the customer's eye (before the competion gets their own eye in with unbundling). Even so, this years normalised profit was the best since 1999 at $820m for FY2006. Furthermore next years profit is forecast in the $820m-$860m range - another increase.

This is the bit that really stumps me. Profits are forecast to increase in FY2007 for the 6th successive year to near decade highs of $820m-$860m. Yet the TEL share price plunges 30%? Yes I know that the dividend has been cut by 20% to appease the government. But overall earnings are not affected, so neither is the PER. The fact that the TEL share price has been marked down by 30% due to the dividend cut suggests to me that the market expects Telecom to earn no money at all from all the new investment the governmnet is making them do. That argument isn't coherent to me.

In the past you might have been able to ar

duncan macgregor

19-08-2006, 08:27 AM

SNOOPY, The TEL share price will continue to trend down. You make the very big mistake with basing your fundamental analysis on past results, then projecting that into expected results of the future.
The future of TEL has very little to do with past results, which are obsolete and out of date. This is how I see it.
1, Very poor public image.
2, very poor employer relationships with its workers.
3, very poor relationship with the govt.
4, must tool up new systems to even stand still.
5, the ever increasing competition makes for lower profits.
6, you wont agree with this one but lines are becoming obsolete.
7, TG gets paid to much and will hang on like a politition for the money and perks regardless of the good of the company.
I could go on but i think the sp is still to high for the risk. Yesterday was yesterday, forget that, its tomorrow that counts, this company is sinking the boat developed a slow leak. MACDUNK

Snoopy

19-08-2006, 11:34 AM

quote:Originally posted by duncan macgregor

SNOOPY,

Before I get into you yet again Macdunk, I will give you a bouquet for being one of the most consistent in fronting up to me [even if you are usually wrong ;) ]

quote:
The TEL share price will continue to trend down. You make the very big mistake with basing your fundamental analysis on past results, then projecting that into expected results of the future.

To some extent one has to do this as the only hard fundamental data *is* past data. IMO to ignore the past is to go too far though. Ocean liners don't turn around on a dime. Although the telecommunications landscape in NZ is changing, we can look at what has happened overseas in other jurisdictions to see what happened when local loops were unbundled 'over there'. There *are* some advantages in being one of the last countries to unbundle, and that is we can better learn from what happened when other countries did the same.

You can argue that NZ isn't overseas and our market will behave differently. That is a fair enough position to have. I'm not suggesting that NZ will follow what is happening overseas *exactly*. For example, Telecom NZ never went absolutely mad on a global acquisition trail like BT in the UK did, or even Telstra (Oz) with their unfortunate foray into Hong Kong based 'Pacific Century Cyber Works'. Neither was Telecom entirely exempt, as witnessed by the tremendous wealth destruction that has happened with various moves into Australia. Yet Telecom is still here, and financially in good shape.

IMO we *can* learn something useful from what has gone on around the rest of the world. That is why I have spent countless hours studying what happened in the UK with British Telecom (see Focus Investment Group, other channel). Particularly so because that company has been held up as a 'pin up boy' by our government as to how they think Telecom *should* behave. Telecom themselves have been over to the UK to study the BT model closely. Telecom have a will, albeit down the barrel of a government gun, to change. Why are you so determined in thinking they will be unable to achieve 'the transformation'?

quote:
The future of TEL has very little to do with past results, which are obsolete and out of date. This is how I see it.
1, Very poor public image.

Name one incumbant utility provider that doesn't!

quote:
2, very poor employer relationships with its workers.

Examples?

quote:
3, very poor relationship with the govt.

TEL have sacked the head of the government negotiating team. And Theresa will be gone soon enough.

quote:
4, must tool up new systems to even stand still.

This has always been true. Telecom have taken some big write downs on their 025 network by misjudging its longevity. Hundreds of millions of dollars were written off with Telecoms failed 'First Media' cable TV roll out of

duncan macgregor

19-08-2006, 01:29 PM

SNOOPY, I think that we have been debating this company, and RBD for at least a couple of years now. I have been absolutely right so far, and you have been absolutely wrong. You seem to come at it from an accountants approach, and me from a practical common sense talk to the workers angle. Its pointless trying to tell someone that they are wrong when they wont even admit it to themselves.
When a person loses their capital at the rate you lost yours with this company then comes out with the pathetic dividend as a reason to hold, then they want to have another look at them selves. This company has lost you heaps over the years, why dont you admit it, and move on?. I remember a couple of years ago i promised not to nag you about RBD and how silly you were to hold a dog like that, so i will include TEL. Dont add to my list buy something decent for a change.
Start up a new thread like i did, a SNOOPY GOT IT WRONG THREAD.
macdunk

Bottom Feeder

20-08-2006, 11:05 AM

Only time will tell who is right. But I agree with Snoopy.

Remember those famous words "The Government should not do anything stupid"

I believe the Government will back down to some extent. As has happened in TLS in Aus. They will not be spending any more on capital expenditure or improvements to the copper wire system, unless they can be assured of a reasonable rate of return and limited access to its infrastructure by competitors.

In NZ, the same is likely to happen. No further capital expenditure on infrastructure to be shared with competitors without a reasonable rate of return and controllable by Telecom.

What you fail to take into account Dunc is that your premise is based on no new or possible competitive reaction to controls, by Telecom. There are many ways around the current regulatory environment. Further there are many ways of increasing marketshare and new technology for the future of Telecommunication in NZ and our Telecom is in the best place to take advantage of these. One of the main reasons for this is not so much the future of the copperwire system, but the fact that they own it and have many many customers using it. They have a captive market which will move into new technology with Telecom when the transition is made.

Bottom Feeder

20-08-2006, 11:13 AM

One further matter. Our market is small, relative to Britain. The only ones to enter our market will be very small niche companies, offering special services which can quickly be duplicated and sold by Telecom. The other players TLS, Vodafone and others dont want a big war, because of the risk of failure.

Snoopy

21-08-2006, 01:33 PM

quote:Originally posted by Bottom Feeder

I believe the Government will back down to some extent. As has happened in TLS in Aus. They will not be spending any more on capital expenditure or improvements to the copper wire system, unless they can be assured of a reasonable rate of return and limited access to its infrastructure by competitors.

I can't see much backing down on Telstra from the government in Australia. CEO Sol's updated outlook for Telstra is just out!
The fibre to node network (FTTN) update has been taken off the table by Sol.

- Revenue Growth of 1.5 to 2.0 per cent;
- EBIT growth of plus 2 to plus 4 per cent;
- Underlying EBIT (excluding transformation costs) to be minus 2 to minus 4 per cent;
- Operating cash capital expenditure of between $5.4 and $5.7 billion.

This guidance assumes no FTTN build, a Band 2 ULL price of $17.70 applying for all wholesale customers for the remainder of fiscal 2007, no additional redundancy and restructuring provisioning and fiscal 2007 being the largest transformational spend year.

Far from backing down, the Oz government is pushing ahead with what, according to Sol (Telstra's CEO), are unreasonable price controls. The 12 month figure for wholesale unbundle line access of $A212.40 is less than the $A250- figure mandated by the UK government for wholesale access in the UK. But given UK labour rates are likely to be higher in $A terms, I'm not convinced the Oz government's $A17.70 per month is totally unreasonable - for city access. The problem Telstra faces is that I'll bet it costs more than $17.70 per month to service an outback customer. Here it seems there is a case for the Ozzie government to cut Telstra some slack. For comparison, does anyone know what wholesale price Telstra pays to Telecom for reselling Telecom's local phone service now?

Telecom NZ duct is being depreciated over 50 years. So perhaps Telstra's 40 year duct depeciation life does mean that excessive profits are being milked by Telstra from their monopoly owned duct and copper? Personally I do not believe that the NZ government will take what the Oz government has done as a cue to force down wholesale LLU access prices further in New Zealand. If they did it would imply a duct life of perhaps 60 years which to my knowledge would be unprecedented in the world.

IMO any Telecom NZ share price fall today is an unwarranted sympathy reaction to what has happened in Australia. While underlying EBIT is forecast to fall in Australia with TLS, that is not the case with TEL in NZ. That means any fall in Telecom's share price based on what was announced in Australia today should be considered a TEL share buying opportunity.

quote:
In NZ, the same is likely to happen. No further capital expenditure on infrastructure to be shared with competitors without a reasonable rate of return and controllable by Telecom.

That's where you are wrong Bottom Feeder. The NZ government seems determined to control the wholesale network pricing, and consequently the implied rate of return. The question is will the government mandate a rate of return that is below cost? I don't think they will.

The immediate effect of Telstra's announcement today should be positive for Telecom's Australian arm, AAPT.

SNOOPY

duncan macgregor

21-08-2006, 02:00 PM

Another great buying opportunity SNOOPY. What Interests me is at what point you realise your mistake in holding this downtrending dog and wake up to reality. Looks like my forecast of $3-00 will come to pass sooner than even i expected. macdunk

Enumerate

21-08-2006, 03:09 PM

In my view, part of the reason Australian/NZ governments are so keen on regulatory price control is the fact that inflation now looks like it is gaining a hold in our economies.

Rather than address the fiscal and monetary reasons why inflation is ramping up or acknowledging that global inflation is on the rise due to oil prices and George Bush's adventures - they prefer to effect price control.

Big infrastructure companies are sitting ducks due to the ease in which "theft" can be spun as "monopoly protection".

As the economy enters into the next recession - no one will notice the inevitable creep in government spending as a percentage share of GDP. No one will correlate persistant high inflation with increased government spending/borrowing.

Welcome back to the Muldoon era of the early 80's ...

I am hearted to see Vector and Telstra publically state they will cut investment in the face of government expropriation of services. Telecom should do the same thing.

trackers

14-09-2006, 06:12 AM

$90 million changing hands yesterday...has to be said, thats a big figure. TEL looking good at the moment, and will be looking better if/when it spins off Yellow (which I suspect will be sooner than later given the recent action)

Bottom Feeder

16-09-2006, 10:36 PM

Well Duncan how does it feel to be wrong totally.

Tel share price rising even after the payment of the dividend. Telstra and Vodafone backing down on govt regulation due to their wish for TEl to continue to invest in the copperwire technology.

Govt under pressure to pay compensation. Government backtracking on total regulation.

Duncan you were very outspoken on how you are always right and everyone else is wrong. Well I love making the money while you only seem to love the attention.

duncan macgregor

17-09-2006, 07:33 AM

Bottom feeder, You are jumping the gun my friend, i have been telling you all about this dog for at least two years. Share price then to share price now on a market that has been in an uptrend. Reason for the price rise is the perception it had fallen to low, plus the rise in the dollar. Nothing fundamentely has changed TEL is still a dog as you will find out if you are a long term holder. You can trade any share and make a profit if you read the market. Wait a couple of years before you start saying you are right or wrong. If they sell the yellow pages you might get another short blip are you ready for that?. macdunk

shasta

17-09-2006, 12:24 PM

Well said macdunk, Snoopy pulled me up for including a "one off" special dividend as part of calculating Telecom's then dividend yield, & now it seems Telecom are going to sell the family silver & pay out another special dividend/capital return.

RBD, HQP & FTX are also examples of selling the family silver/borrowing to pay for dividends.

Whats next, they sell there buildings & lease them back?

Disc: No TEL (woof woof)

Snoopy

18-09-2006, 02:45 PM

Speaking of the future of Telecom, if they continue down the path of their British Telecom mentors, and the Telecom video division has already been formed, just how will Sky TV in NZ survive this?

From www.bt.com/btvision

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

BT Vision comes with a clever set top box which we deliver and install for you. Our skilled engineers will connect the box to your existing TV aerial (for the Freeview channels*) then to your telephone line - so you can access the huge library of on-demand entertainment via BT Broadband.

You'll then be able to choose what you want to watch, view the TV guide, and record programmes onto your set top box using the simple on-screen menu. It really is a doddle to use.
Register your interest

And don't worry if you don't already have BT Broadband or a BT line. We can advise you on the best package to suit your needs.

*If you can't currently receive Freeview in your home, you won't be able to watch the 'free-to-air' TV channels, but you can still watch BT Vision's great on-demand entertainment.

-----------

SNOOPY

duncan macgregor

18-09-2006, 03:19 PM

SNOOPY, Rather you than me to invest in sky or telecom both are in for radical change. Thirty years ago mobile phones, satelite tv, computers, internet, to name a few of todays gotta haves were not even on our want list. Tomorrow satelite computers, phone systems, tv broadcasting, will all come without wires. Your TEL might get into the scrap metal, and firewood business. SKY tv and telecom to succeed will have to fend off fierce competition or go under.
Tomorrows changes will be more pronounced than yesterdays. I know you wont agree but thats how i see it. macdunk

trackers

18-09-2006, 03:35 PM

True about the changing needs, Duncan - Worthy to note though that TEL is a huge player, that can draw on a massive amount of money if/when it needs to, to develop new technologies to meet changing needs, and meet new competitors head on with a huge infrastructure base, mass marketing etc. The barriers to entry (for a big play) are quite large, and TEL has economies of scale to further give it an edge....

There is room for niche markets, but the big players will dominate for a long while yet.

disc: hold none

19-09-2006, 06:25 AM

I guess everyone already knows SKT and Tel have signed an partnership to supply services. They have developed the STB for both Sky and Video on demand they are waiting for ADSL +2 to be implemented greatly for business growth to be worth while. So I think SKT at least should be a Buy or at least a Hold.

Snoopy

19-09-2006, 11:25 AM

quote:Originally posted by ds

I guess everyone already knows SKT and Tel have signed an partnership to supply services. They have developed the STB for both Sky and Video on demand they are waiting for ADSL +2 to be implemented greatly for business growth to be worth while. So I think SKT at least should be a Buy or at least a Hold.

ds, I had one of those courtesy calls from Telecom over the last fortnight, thinly disguised as a trawl for more business. I was asked if I had Sky TV (I don't) as some kind of lead in to offering me a bundled package. I am also aware that until FY2005 Telecom had a shareholding in Sky TV (since unwound).

In the past Telecom has tried to go head to head with Sky TV, when in FY1997 they rolled out 'First Media' cable TV in limited release (parts of Wellington were some of the guinea pig areas IIRC). 'First Media' didn't last much longer than a year before $37m in abnormal costs were written off (as at 31st July 1998). It was after this Telecom cosied up to Sky TV.

Get hold of the following Telecom 2006 press release from the Telecom investor website.

iptv_macquarie_ pres.pdf

and have a look.

There are statements in there about taking a 'low risk' approach and working with partners (page 8). But I see nothing in the report to suggest that Sky TV will remain an *exclusive* partner. The growth strategy staircase (page 9) of Deep EPG (Electronic Program Guides), Interactive Services, Trickle Content and finally Real Time Services are equally valuable paths through which to partner other TV operators. Sky TV itself is written about as part of the telecommunications landscape. There is no indication that they will always receive favourable treatment from Telecom. But if you have information about long term agreements Sky TV might have with Telecom, please fill me in. I am not a close follower of Sky TV myself.

Finally the two case studies of BT and PCCW, there is no mention of partners at all. My reading of this is that eventually Telecom see themselves as the provider of choice for video content in their own right. That has to be bad news for all the existing TV operators, not only Sky Television!

SNOOPY

discl: Close follower and shareholder of TEL

kura

09-10-2006, 10:21 PM

I see that IIN (ASX) has announced sale of it's NZ bizz (ihug) to Vodaphone today, not entirely sure of implications, though IIN did advise that sale price was in excess of book value, looks like TEL will have strong competition on several fronts now ! (sale price of ihug no doubt being enhanced by recent NZ regulatory moves)

Pity I took a profit on my IIN shares a month or so back, as price went up on announcement today "bugger" !

Also, as I logged on to computer tonight (xtra is my homepage) I noted that they had a news article stating that front runner to buy ihug was some govt owned broadcasting organisation, gee talk about out of date news !

If you are feeling any symathy for poor TEL, you will be delighted to know that they have found out a way of reducing their decline in margins, as I am honorary treasuer of a charitable trust, and I have just discovered that dear TEL has recently removed the consessional rates they used to give charities, and now charge them full commercial rates. (Bless their generosity)

kura

09-10-2006, 11:29 PM

Thought I'd better explain my previous post, and state that by full commercial rates, I mean paying per minute for local landline calls, same as any commercial bizz pays. (previously charities only paid residential type line rental, and local calls were free) Yes there is a 10% discount offered by TEL to charities, however this applies only if "All your bizz" is through TEL, (ie no discount if you don't have xtra as your ISP, or TEL as toll provider )

The sooner this bunch of rapacious scumbags are regulated into oblivion the better, as far as I'm concerned.

Enough Ranting
Jackal #1, over and out !

beacon

11-10-2006, 09:13 AM

$3.5 looks definitely possible, now that Vodafone is firmly in.

duncan macgregor

11-10-2006, 10:09 AM

quote:Originally posted by beacon

$3.5 looks definitely possible, now that Vodafone is firmly in.

Wonder who will be proved right I said $3-00 SNOOPY reckoned $5-00. Its down hill all the way with a few blips in the sp when they sell off the family silver. C-mon SNOOPY give us your latest thoughts on this one. Macdunk

Snoopy

11-10-2006, 10:21 AM

quote:Originally posted by beacon

$3.5 looks definitely possible, now that Vodafone is firmly in.

While no-one would deny $3.50 for TEL is a 'possibility' beacon, I would say it is a very unlikely possibility. I'm not really sure what you mean by Vodaphone being 'firmly in' either.

Certainly Vodaphone has bought Ihug. That means we could have more package deals coupling Ihug/Vodaphone. However, Ihug is simply reselling Telecom lines for their own fixed line package. So all that means is that some of Telecom's retail customers will become wholesale customers. Whether that is good or bad for Telecom depends on the retail margin and wholesale access costs for third parties to Telecom's network.

Read up on what has happened setting UK wholesale rates, in the UK and under regulatory body Ofcom. Ofcom did a global comparison before imposing UK wholesale regulatory rates. Telecom's existing wholesale rates are not excessive as they are already below what has been regulated in the UK. Therefore IMO, NZ wholesale rates are unlikely to be regulated downwards.

If wholesale rates *are* regulated downwards, to the extent that Telecom would stop investing in the network entirely, then Telecom's profits will immediately *jump* by around $300m per year, or up more than 30%! This would be a short sighted strategy by Telecom that in the long term would backfire of course. But this example does indicate that if the current telecommunications environment is made too onerous, that does not necessarily mean that Telecom's profits will drop, at least in the short term.

Further, you should remember that despite LLU, no-one else has put their hand up to build a new alternative network. Indeed it is quite the reverse. We have lots of minnow players springing up and saying what a great thing deregulation is because they can now piggyback on Telecom and Vodaphone and spend next to no money on infrastructure themselves! The bottom line is wholesale network pricing must be set at a level that makes investment viable. If it isn't then Telecom will stop investing and TEL profits will rise accordingly in line with the cancellation of their $500m investment program. And a large rise in profitability does not generally go hand in hand with a fall in share price.

Back to Vodaphone, their share of the mobile market in NZ relative to Telecom has been quoted to me within the last 24 hours as 55%-45%/ 53%-47%. Either way, Vodaphone equates this to 20% of the total Telecommunications market, so they have plenty of room to grow. But while taking over Ihug will grow Vodaphone's market share for them, it won't necessarily harm Telecom at all. All the Ihug/Vodaphone merger has done is to bring two smaller market players together.

If mobile market interconnection charges are forced down by the commerce commission, that will be great for Telecom. As long as their market share is below 50, TEL will gain more revenue form interconnections *not* paid to Vodaphaone than they will lose from the reverse effect.

IMO the current decline in the Telecom share price is related to November's upcoming $A8billion dollar sell off of Telstra shares in Australia draining away investment funds that would normally be spread more evenly across the Telecommunications sector. I'm sticking to my forecast of Telecom shares trading around the $5 mark by Christmas (taking off the 23.5c in dividends already paid since I made that proclaimation of course).

SNOOPY

discl: hold TEL, TLS, BT.A

Enumerate

11-10-2006, 11:05 AM

Followers of TEL.NZX should look accross the Tasman to gain some insight into the commercial forces driving telco revenue/profitability.

TLS.ASX had 95% of its revenues, a decade ago, in POTS (Plain Old Telephone Services). Its current POTS revenue is about 45%.

The difference is made up of new PANS services (Pretty Amazing New Stuff). This differential is expected to grow with POTS at about 30% steady state.

Hence telco's are companies in transition.

However, they are also 900lb gorrillas from a cash flow perspective. They can transform the services/capital equipment base and still pay a dividend!

In my view, TEL.NZX is a raging BUY at $4.00. (It would be a STEAL at $3.50 and an INSANE DEAL OF THE CENTURY - TIME TO MORTGAGE THE HOUSE at $3.00)

beacon

12-10-2006, 09:59 AM

Snoopy, it is the growing trend of using cellphones only that concerns me. Vodafone is firmly in to capitalize on this aptitudinal shift, due to the latest Commission stance. This will hurt Telecom's bottomline in the long run, and what they will make on interconnection traffic to Vodafone is peanuts compared to the market share and profitability erosion. Those are my thoughts.

BTW, some broking houses have also now called down TEL target valuations to below $3.50. Obviously, I am not alone following this reasoning. I have a holding in TEL, so I hope you are right. I don't see it near $5 by Xmas even excluding dividends, but nor do I see it at $3. Won't need that mortgage yet Enumerate.

Sub $4 is looking increasingly likely.

Snoopy

12-10-2006, 01:52 PM

quote:Originally posted by beacon

Snoopy, it is the growing trend of using cellphones only that concerns me. Vodafone is firmly in to capitalize on this aptitudinal shift, due to the latest Commission stance. This will hurt Telecom's bottomline in the long run, and what they will make on interconnection traffic to Vodafone is peanuts compared to the market share and profitability erosion. Those are my thoughts.

The Commerce Commission wants more mobile players at the retail level and so far Vodaphone is obliging. An example is the wholesale deal Vodaphone have set up with Orcon. There is absolutely nothing to stop Telecom doing the same type of wholesale arrangements though. So I don't understand your point beacon.

quote:
BTW, some broking houses have also now called down TEL target valuations to below $3.50. Obviously, I am not alone following this reasoning.

What reasoning is that beacon? Seems more like a knee jerk reaction devoid of any reason to me! If any of these doomsayer analysts ever get around to presenting a coherent argument I'll take a look at it.
In the meantime I will present my own coherent argument as to why $3.50 *isn't* going to happen.

If we first consider the around $1.50 fall in share price that occured when local loop unbundling/naked DSL was announced by the government, that represents around a 25% fall in share price. That means that Mr Market is telling us that over the longer term Telecom's overall profitability will decline by around 25%.

Telecom's current after tax profitability is for FY2006 split between:

NZ Fixed:NZ Mobile:International in the proportion
88:12:0 respectively.

A 25% drop in overall profitability from LLU/naked DSL (which doesn't effect NZ Mobile or Australia) would suggest a long term (88-25)/88= 28.4% decline in profits from the fixed line business. I am not suggesting that I think this will happen. I am merely pointing out what Mr Market implied would happen to the underlying business by marking the TEL share price down by $1.50. That leaves our prospective net profit spread in relative terms as follows:

NZ Fixed:NZ Mobile:Australia 63:12:0

Scaling those figures back up to 100% gives us the new prospective profit split in percentage terms of 84:16:0

Now let's see what happens if Mr Market agrees with our doomsaywer analyst friend. If we take a baseline share price of $4.19, where Telecom closed yesterday, then a share price of $3.50 reflects an expectation that over the long term profits will decline a further 15% or so, due to deregulation of the mobile market alone. If NZ mobile profitability falls enough to reduce Telecom's overall profits by 15%, that means 95% of Telecom's Mobile profits will disappear!

Beacon, you seem to be concerned at the effectiveness of Telecom's mobile division. Telecom don't quote after tax profitability for each division, and instead feeds us EBIT (Earnings Before Interest and Tax) figures. Nevertheless by apportioning known interest costs and actual tax paid it is possible to estimate net profit divisional figues.

Over the last five years I estimate the Telecom mobile division has made a NPAT as follows:

2002: $43.2m
2003: $37.5m
2004: $46m
2005: $69m
2006: $111m

Given this performance in the most open competitive part of the market, you should now ask yourself beacon whether you believe that by FY2008 mobile network profitability will fall by 95% to:

2008: $7m(?)

In summary then:

IF Telecom
1/ Suffers a 28.4% decline in fixed network profitability AND
2/ Suffers a 95% decline in NZ mobile network profitability AND
3/ Continues to barely break even in

beacon

12-10-2006, 09:51 PM

Nice coherent argument Snoopy, although I don't understand it all completely. Never the less, let us see what Mr.Market thinks around Xmas ...

Interesting comment about shirts. I understand that you have already been buying some discarded shirts. I have kept mine on for the time being, although I was hurting when the knives fell off around $6, but will buy new ones sub4 only now, if then ...

HarryFlashman

25-10-2006, 10:08 AM

So sale of the directories division may be imminent. I don't see much logic in seling a dominant advertising medium that is hugely profitable just because it faces competition. Yellow pages is also available and heavily used on line. But there again I am not a fat bloated useless incompetent trying desperately to hang on to my $1m a year by rushing about creating confusion.

Maybe the $1.5bn on the cards for YP is earmarked to pay off the senior management. Teresa and her minions should be getting "restructured" right now, well before the axe falls on seven hundred hapless middle managers.

Good old Telecom!

Cheers
Harry

PS Tim Miles????? I know he did well at Vodafone here but a short stint in the Uk before scuttling back to NZ does not make him a global telecoms master strategist, mover and shaker.

Snoopy

27-10-2006, 04:12 PM

quote:Originally posted by beacon

BTW, some broking houses have also now called down TEL target valuations to below $3.50. Obviously, I am not alone following this reasoning. I have a holding in TEL, so I hope you are right. I don't see it near $5 by Xmas even excluding dividends, but nor do I see it at $3. Won't need that mortgage yet Enumerate.

Sub $4 is looking increasingly likely.

Telecom now trading at $4.50! Add on the 23.5c in dividends paid since my '$5 by Christmas' prediction and we are already at $4.73, with two months to go. I wonder if Macdunk still thinks Telecom will be nearer to $3 than $5 by Christmas?

This strength in the Telecom share price at this time is particularly noticable because:

1/ It is happening as the $NZ is falling. Often Telecom acts as a proxy for the $NZ and falls with a falling currency as overseas traders quit their positions.

2/ It is occurring when there is a large competing offer on the table for investors to sign up to the Telstra 3 offer. Generally institutions don't like to become overweight in one particular sector and such an offer would generally depress the Telecom share price in the short term.

So why is Telecom behaving is just the opposite way to what might be expected, taking into account historic precedent? I have a theory.

IMO the T3 offer for Telstra, which seems to have a cool reception, has focussed attention on the Telecommunications sector. Analysts are suddenly realising how cheap Telecom NZ is in relative terms and the big funds are buying Telecom instead of T3.

I am not denying that LLU and naked DSL will more than likely have a negative effect on Telecom. I do believe that *most likely* (but not certainly) Telecom shareholders will lose something because of that government decision. But that loss in value is nothing like the $5.50 to $4 share price decline that Mr Market inflicted at the time.

IMO, and I have been consistent in this view, anyone who sold out of Telecom at around $4 during the market rout has made a serious mistake. I was of course *buying* at those price levels putting my money where my mouth was. So am I going to be buying more now that Telecom has broken through $4.50? Well no because I have already done all the buying I wanted to do near the $4 mark (for the moment). And despite thinking that Telecom will probably get to $5 by Christmas there is a significant short term risk (if Yellow pages are not sold and Australia turns for the worse) that Telecom may head back to $4. If that happens I may just buy a few more while Macdunk reprises his clarion call to make for the lifeboats.

I see my most likely annualised return of 30% (that is what going from $4.73 equivalent to $5 in two months does for you) as merely 'good value'. That is an insufficient return to compensate for the (smaller) possibility of a significant price decline. For the moment I'll stay sitting on the sidelines watching old Macdunk 'sweat his bet'.

SNOOPY

discl: hold TEL

Bottom Feeder

29-10-2006, 12:17 PM

McDunk,

Very happy with my investment in Telecom.

But will be selling out, not becauseI doubt the future of Telecom. But I like to get in and out in a short time.

beacon

31-10-2006, 07:17 AM

Round 1 to Snoopy, it seems.

Deev8

03-11-2006, 10:47 AM

Telecom's Q1 results.
The official version:
http://www.nzx.com/market/market_announcements/by_company?id=139265

The NZ Herald's view:
http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10409006

Snoopy

07-11-2006, 02:10 PM

quote:Originally posted by beacon

Round 1 to Snoopy, it seems.

I never like to call these things before the fat lady sings.

But Telecom is now trading at $4.85 as of this morning. Add on the 23.5c paid out in dividends since Macdunk and I made our bet and the equivalent share price is now $5.08! That means I have well and truly won the bet now, with some seven weeks in our competition to go. Even I didn't believe the recovery of the TEL share price would be *that* fast though, which is a good reason not to consider yourself too smart in predicting what the market will do. Yet if this kind of share price rise of TEL is happening now, I wonder what will happen when the competing T3 offer closes on Thursday!?

I presume Belgarian who thought he could see a 25c TEL share trading pattern swing has now been cashed out of this game permanently. It is a pity he couldn't see the bargain of the year even as it was paraded right in front of his nose, and got sucked in to playing with Mr Market instead. Bottom Feeder will be gone because of the bizarre restriction he imposed on himself of 'getting out in a short time', even though he liked the company. Beacon is still hopefully hanging around the $4 shirt rack which is empty and not looking like being restocked . No doubt he will have to go to Christmas dinner shirtless now. And these are only the timing disaters that people admit to! I'm not trying for any one upmanship here. I am no better than any of these guys at timing the market myself. The only difference between me and them is that I *know* I am no good at it while those others think they are better than they really are and have been 'dealt to' by Mr Market accordingly.

I hope this will serve as a lesson to those who 'sold out' around $4 in reaction to poorly quantified 'bad news', that Mr Market isn't always right. That means if you are a shareholder in a good company (an important proviso) there is no need to 'swing at every pitch' that Mr Market makes to you. I was buying when the so called 'smart money' was selling, and my average entry price has been reduced from $5.97 to $5.45 accordingly.

I say so called 'smart money' in quotation marks. Because observing the changes in shareholdings between 1st August 2005 and 1st August 2006, as listed in the respective TEL annual reports, paints an interesting picture. Overall Telecom has lost 3.5% of shareholders since the unbundling brouhaha broke. That is made up of a 4.2% decline in shareholders holding less than 1000 shares and a 6.3% decline in shareholders with between 1000 and 4999 shares. But - get this - shareholders with between 5000 and 9999 shares have gone *up* by 1.8%. Those holding between 10,000 and 99,999 shares have gone *up* by 11.9% and those shareholders with 100,000 shares have gone *up* by a whopping 13%! IOW in direct contrast to what some of you charting guys indicators might have been telling you, the big boys have been *accumulating* this share over the year at the expense of the Mums and Dads who have been busy selling out at just the wrong time!

Lest anyone point out that in overall terms I am still underwater on my largest NZ market investment (which I am), I am not out to prove that I am some sort of guru where every investment I touch turns to gold. Clearly if you draw a finish line as of today I have done a poor job with TEL. But I have never claimed to be able to predict government interference in the market. There is no finish line being drawn today, as I don't invest for the short term. It is still 'game on' for TEL as far as I am concerned.

Provided your portfolio of shares is broad enough to allow you to watch one egg in your basket shrink by 25%, then the correct thing is more often than not to buy more. Effectively you are betting on 'reversion to the mean' which I have generally fo

duncan macgregor

07-11-2006, 03:14 PM

SNOOPY, If the sp reaches $5-00 i think that you, and your fellow investors are still well out of pocket. Long term its a dog as you will find out. Plenty of averaging down in the future guys, when the family silver gets sold. I find it very funny that a company that has the govt barking at them to open their business up to the opposition would have the fundamentalists claiming success after the losses over the years. Fundamentals say its a dog the Technical analysis tells me you lot will lose heaps more to the traders. Look up the charts at the sp 4 years ago then todays price, OOPS i forgot about your dividends.:D:D:D
macdunk

Mick100

07-11-2006, 04:23 PM

quote:Originally posted by Snoopy
[I am no better than any of these guys at timing the market myself. The only difference between me and them is that I *know* I am no good at it while those others think they are better than they really are and have been 'dealt to' by Mr Market accordingly.

Classic - I think that sentence wins the quote of the day -I coundn't agree more with the way you sum things up here snoopy.
.

Deev8

07-11-2006, 05:38 PM

quote:Originally posted by duncan macgregor

SNOOPY, If the sp reaches $5-00 i think that you, and your fellow investors are still well out of pocket.
Interesting conclusion. Was this the big clue?

quote:Originally posted by Snoopy

Lest anyone point out that in overall terms I am still underwater on my largest NZ market investment (which I am) ...

Snoopy

07-11-2006, 06:35 PM

quote:Originally posted by duncan macgregor

. Look up the charts at the sp 4 years ago then todays price, OOPS i forgot about your dividends.
macdunk

Over the last four years the total dividends from Telecom have amounted to $1.26 per share! Hardly insignificant. But I guess because they don't appear on your chart you can safely ignore them.....

SNOOPY

duncan macgregor

07-11-2006, 06:56 PM

quote:Originally posted by Snoopy
Over the last four years the total dividends from Telecom have amounted to $1.26 per share! Hardly insignificant. But I guess because they don't appear on your chart you can safely ignore them.....

SNOOPY
Dividends are like icing on a cake. I dont judge a cake by its icing. Add your four years dividends to your sp you are still way behind. Its been a great market over the four years your TEL should be over $10-00 to have kept up. It will still downtrend in the long term wait until the next four years then throw it back at me. MACDUNK

Snow Leopard

07-11-2006, 07:29 PM

On the 7th November 2002 TEL closed at $4.77 according to my data and today it closed at $4.80.

So TEL returns have been 26.4% on dividends* plus another 0.6% capital gains

Now I know of a certain stock for which the comparable figures are
29.4% dividends* plus 535.5% capital gains. :)

*based on initial investment.

redzone

07-11-2006, 07:38 PM

And is

Snow Leopard

07-11-2006, 08:39 PM

{4} (http://www.sharetrader.co.nz/topic.asp?TOPIC_ID=20192)

MFT is an extreme example but I guess that they are a good quantity of shares, which although having a lower initial dividend yield, have grown their dividends (and their SP) over the years to give a better dividend return on initial investment with the added bonus of a reasonable capital gain.

Footsie

07-11-2006, 09:44 PM

TEL price looks rich, but will continue to rally while offshore movey chases the momentum of Telco's

Deev8

10-11-2006, 03:29 PM

Overnight BT released its interim results in the UK. They reported a 14% increase in earnings per share and lifted their interim dividend by 19%. Of course that's the UK not New Zealand, and who knows if Telecom have similar management talent. But once again BT demonstrate that it is possible to thrive in an unbundled environment.

http://www.investegate.co.uk/Article.aspx?id=200611090700437940L

Deev8

10-11-2006, 03:52 PM

According to the Dominion Post - The Government is poised to force a far-reaching restructuring on Telecom that would split New Zealand's biggest company into three divisions - all with separate management.

http://www.stuff.co.nz/stuff/dominionpost/0,2106,3855767a6000,00.html

Bottom Feeder

11-11-2006, 11:47 AM

Not worried now. Am out at the moment, but will keep funds on call until the price reaches its lows again. Love the volatility.

Had a thought perhaps Govt is making rash announcements so that Cullen Fund can make a killing and buy in anytime price reaches a low.

Deev8

24-11-2006, 03:51 PM

This afternoon The Herald has published an article suggesting that:

Telecom may escape being carved in two when a parliamentary committee reports late next week, saving the company's share price from a further battering.

Committee chairman Shane Jones said on Friday there was nothing in the bill to cause Telecom investors too much concern.

"The committee is very, very aware of the importance of maintaining pro-investment sentiment and pro-investment frameworks," he said in a telephone interview.

"For those people who have been angst-ridden and worked themselves into a lather over ownership splits, I think they should just wait and see."

NZ Herald - Telecom may dodge regulatory carve-up (http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10412296)

kura

28-11-2006, 01:22 PM

While I understand the basics of the split, anyone know implications for mobile/wireless type infrastructure, could competitors "piggy back" on this as well ? (If so, surely Vadaphone would also be opened up to competitors) or do changes only apply to the old copper wire ?
News reports wern't all that helpfull on the exact extent of changes !

Deev8

28-11-2006, 06:21 PM

Today's recommendation of a full accounting and operational separation into at least three units -- wholesale, retail and network -- was tilted towards the better end of possibilities, according to Forsyth Barr analyst, Jeremy Simpson.

In Britain, BT Group was forced into full structural separation and the committee received advice from some quarters this was the only way to ensure true competition in a market Telecom has dominated through control of its wire network and by sheer weight.

Lawso

29-11-2006, 11:05 AM

A pretty strong s p performance by TEL this week, I reckon. Down 8c on Monday in a weak market despite going ex a 7c div; up 4c yesterday despite more government thievery; reasonably firm so far this morning. I'm picking continuing steady gains over the next year or so, while holders continue to enjoy excellent income. There's still a place for TEL in any balanced NZ portfolio.

kura

30-11-2006, 09:42 AM

Extract from NZ Herald (Yes Lawson, any balanced portfolio needs its highly speculative shares)
......................

After the select committee decision, Goldman Sachs JB Were analyst Andrew White put a potential valuation on Telecom shares of between $2.80 and $4.20, against his current valuation of $4.08.

Telecom was earning "world class margins" from its New Zealand operations.

"It is difficult to avoid the conclusion that this incorporates a portion of monopoly profits that will be exposed under a more transparent operating environment," said White.

Snoopy

30-11-2006, 02:24 PM

quote:Originally posted by kura

Extract from NZ Herald (Yes Lawson, any balanced portfolio needs its highly speculative shares)
......................

After the select committee decision, Goldman Sachs JB Were analyst Andrew White put a potential valuation on Telecom shares of between $2.80 and $4.20, against his current valuation of $4.08.

Telecom was earning "world class margins" from its New Zealand operations.

"It is difficult to avoid the conclusion that this incorporates a portion of monopoly profits that will be exposed under a more transparent operating environment," said White.

Interesting comments from White. I wonder if he is right?

"Margins" can be defined as "Operating profits"/"Operating revenues".

In the case of Telecom I have calculated these for the last three years as follows:

14.8%, 15.1% and 14.2%.

Now compare these margin figures with the 'reformed' British Telecom (BT) margins over the last three years.

7.5%, 7.9% and 8.2%.

So White is right in this instance, or is he? BT's last balance sheet shows total assets of 0„5 24.8 billion. Total shareholders equity was a mere 0„5 1.6 billion. That gives a debt to asset ratio of 94%. At Telecom, at the last balance date, the debt to asset ratio was 83%. However, this level of debt was after the one off write off of AAPT $1.3 billion was removed from the balance sheet. For the financial year the actual debt level was 62% of assets.

Now, if we 'normalise' BTs results to Telecoms by giving BT at debt level at 62% of assets, then the debt level of BT will be substantially reduced, and profits will be corresponingly increased (because they no longer have to pay interest on all that debt).

That 'extra debt' that BT are carrying is 0„5 7,390million. At a borrowing rate of 7.5% that produces an annual interest bill of 0„5 554m. Using a tax rate of 30% that would give a boost to BTs underlying profit of 0.7 x 0„5 554m = 0„5 388m or 21%. That change alone woudl increase BTs margins as follows:

9.1%, 9.6%, 9.9%

BT is also different to NZ Telecom in its business mix. 21% of revenue is what BT defines as 'new wave' networked IT services (EBIT margin 4.2%, or about half BTs traditional business) to corporates which is a lower margin business than the traditional wholesale and consumer business. Within Telecom the equivalent businerss group is called "gen-i" (EBIT margin of 7.0%) which makes up a less 6% of the business in revenue terms.

If we normalise both the BT and Telecom margins by removing IT from the quoted figures I get for BT an increase in margin of 12%. That means the overall margins are:

10.2%, 10.8%, 11.1%

And an equivalent increase of margins of 3% for Telecom gives us the equivalent figures:

15.2%, 15.6%, 14.6%

We also need to consider that Telecom has its own mobile network while BT does not. Mobile technology is faster changing which means an increased margin is justified to allow for the possibility of technological obsolescence. The recent write down on the Telecom 025 network of late was testament to that.

Even leaving aside that last point which is difficult to quantify, White does have a point 'all things considered equal'.

The other side of this argument is the relative value the market has put on both companies measured in terms of PE ratio, over the last three years (taken at September 30th).

For BT: 11.0, 13.1, 14.6

For Telecom: 14.4, 13.9, 10.4

No real surprise here. BT shows an increase in PE as its earnings streams are perceived to be becoming more secure, whereas at Telecom PE is decreasing due to the uncertain outlook for future earnings. The net result, because of that uncertainty, is that Telecom is perceived to be 40% less valuable that BT on an ongoing earnings basis. That means even if margins at Telecom *do* decline

Stranger_Danger

30-11-2006, 02:52 PM

Snoopy,

Regarding

"Of course there could be another explanation for Telecom earning 'world class margins'. Did White (or kura) ever consider Telecom might be a 'world class company', and about as far removed from a speculative share as it is possible to get?"

and Telecom being a world class company, have you ever dealt with Telecom as a customer, about anything, ever?

If thats world class, then I'm Santa Claus and what would you like for Xmas?

Snoopy

30-11-2006, 08:21 PM

quote:Originally posted by Stranger_Danger

Snoopy,

Regarding

"Of course there could be another explanation for Telecom earning 'world class margins'. Did White (or kura) ever consider Telecom might be a 'world class company', and about as far removed from a speculative share as it is possible to get?"

and Telecom being a world class company, have you ever dealt with Telecom as a customer, about anything, ever?

If thats world class, then I'm Santa Claus and what would you like for Xmas?

By 'world class', Stranger Danger, I am talking from an investment perspective. From a customer perspective Telecom are always going to be on a hiding to nothing. That's because users always want cleverer tech at a cheaper price: faster connection speeds and low contention ratios for less and less cost being the obvious example.

From a customer perspective 'world class' would mean spending all profits on putting fibre into all the junction boxes and slashing prices, so we get connection speeds in Megabytes for pennies. Get real!

In a commercial world where the demand is in effect unlimited, there is always a balancing act. Not offending *most* people *most* of the time is usually a good bottom line starting point for the initial foundation of a business strategy in such an environment.

Stranger Danger, I want you to try and divorce yourself from your own experiences and think about other people who are Telecom customers. No, not close cohorts who probably have the same opinion as you do. I'm talking about people in general. Your old granny living on the west coast, the kids texting in the playground at lunchtime, the office manager working the PABX system. For most people most of the time Telecom does a good job. I'm not claiming Telecom are everything to every person. That is why there are all kinds of niche operators out there doing their bit better than Telecom. Myself, I've tried Xtra dial up internet at an elderly relatives house and found it shocking. I don't get my toll calls from Telecom either. And yes I have had problems in an administrative sense with Telecom before. But I have also had problems with other providers that have been much worse!

The bald facts of the matter are that for most people, most of the time, Telecom do a good job. And if you want to know what dealing with a utility provider that *isn't* good is like, you only need cast your way back to the power reforms. I'm talking about taking an hour just to get through to a basic help line and being eventually charged for power on my bill four months late! And that kind of behaviour was quite normal.

With my investor hat on, Telecom are making good on their promise to reinvest in the network while still generating decent profits. Their capital expenditure and depreciation are roughly in balance which is one indicator that Telecom are neither overcharging nor undercharging. Benchmark Telecom against any other incumbant international telecommunications company using any financial statistic you care to name and it comes out well. This is what I mean by 'world class'. There is always room for improvement. But stack Telecom up against any other Telco and the figures still look good.

SNOOPY

discl: hold TEL, TLS and BT.A, but hold far more of TEL.

kura

01-12-2006, 12:05 AM

quote:[i]Originally posted by Snoopy
By 'world class', Stranger Danger, I am talking from an investment perspective.

Therein lies the probem, a world class investment (return) extracted by an effective monopoly, at the expense of the long suffering (and increasingly hostile) consumers ( I can't wait to get naked DSL myself), now if most urban subscribers also opted for this, what would happen to these "world class" investment returns, pray tell me ?

Snoopy, just as Stranger Danger, has obviously let his adverse experiences with Telecom cloud his investment thinking, are you not similarly clouded in your own thinking of Telecom, due to your substantial holdings ? Yes I know you have formulated various theories in the past to justify your TEL holding, and yes, you probably also took a bit of a hit over the last year or so, but have you ever considered what it would take for you to get out of TEL ? I'm not trying to be sarcastic, but merely asking if you have considered a point at wich you would get out (ie earnings below "x" limit )or would you just hold on forever regardless of earnings and share price ?

To change tack, what I would like to see out of TEL, is for management to proactively embrace the recent reforms, and float off the seperate operational companies (retaining a (say) 50% interest in each of them) to effectively become a communications investment holding company. Sort of taking a leaf out of the GPG book, and allow any hidden value to be unlocked. Hey, if I had a few lazy billion in the petty cash tin, I'd do it myself !

The BOWMAN

01-12-2006, 12:19 AM

quote:Originally posted by Stranger_Danger

and Telecom being a world class company, have you ever dealt with Telecom as a customer, about anything, ever?

If thats world class, then I'm Santa Claus and what would you like for Xmas?

I did have two broadband connections at the same time once. One is with Orcon, the other is with telecom. Talking about service, Telecom is way way much better than Orcon!!!

I have met many people talking how bad is Xtra and how good the others are. In reality, most of them are just talking what other people are talking.

Major von Tempsky

01-12-2006, 07:27 AM

And since the other ones are sourcing from Telecom its all smoke and mirrors anyway. How "good" the other ones are comes down to how good basic Telecom is.
I went to Telstra-Clear for a fast Broadband connection, basically the response was they couldn't do it, weren't interested, so I went to Telecom and got one.
Apart from the long inevitable wait on the phone when I have a technical problem I have found the Telecom answer service technicians are very switched on, very with it and most polite and helpful even when it comes down to some twit has partly knocked out a plug even tho it still looks as if it is in.

Stranger_Danger

01-12-2006, 08:06 AM

Hi Snoopy,

Firstly, let me make it very clear I am wearing my investor hat whilst talking about dealing with Telecom as a customer. You say :-

You say

"With my investor hat on, Telecom are making good on their promise to reinvest in the network while still generating decent profits. Their capital expenditure and depreciation are roughly in balance which is one indicator that Telecom are neither overcharging nor undercharging. Benchmark Telecom against any other incumbant international telecommunications company using any financial statistic you care to name and it comes out well. This is what I mean by 'world class'. There is always room for improvement. But stack Telecom up against any other Telco and the figures still look good."

But the reality is, I do not need to stack Telecom up against any other Telco - I get to stack Telecom up against any other *company* that is listed on any exchange, anywhere.

"Include me out" is a valid investment choice, and when it comes to phone companies and your other example, utilities, it is usually my choice.

I take your point that Telecom's service is probably no worse than Telstra in NZ, or the utilities.

However, I see the comparison as being similar to looking at abcd.com on a P/E of 100 back in '99 and saying "well, yahoo is trading at 300, so it must be ok"

Bad service is bad service. Just because you can find other examples of bad service doesn't make it right!

To illustrate my point, lets take 4 groups - Telecom in NZ, Telecom in Australia, Telstra in NZ and Telstra in Australia.

Let us assume that the service is equally bad in all 4 cases - something I think we agree on?

Telecom in NZ - bad service, decent returns.

Telecom in Australia - bad service, awful returns.

Telstra in NZ - bad service, awful returns.

Telstra in Australia - bad service, decent returns.

The conclusion must be that service doesn't matter that much when you are the big kahuna with huge name recognition and a dominant near monopoly position.

In the real world however, service really, really matters.

The more Telecom is exposed to the real world, the more it will matter. The less "monopoly" advantage they have, the more it will matter.

I won't bore you with dozens of accounts of just how bad some of my dealings have been. Needless to say, I think the culture of the organisation is not ready for the changes that may lie ahead. Moreso, I can't visualise how you change the culture of a company that big.

In summary, I would argue that Telecom do not prosper in NZ because their service is "good" or even "ok". They prosper because they are dominant, despite their bad service. This is backed up by how bad their Australian operations (where they are not dominant) have gone, and how poorly Telstra has performed in NZ.

In an environment where their dominance is being picked away at by regulation, service matters, or at least, will eventually.

I was wearing my investor hat when I said that.

Westie

01-12-2006, 09:35 AM

quote:In summary, I would argue that Telecom do not prosper in NZ because their service is "good" or even "ok". They prosper because they are dominant, despite their bad service. This is backed up by how bad their Australian operations (where they are not dominant) have gone, and how poorly Telstra has performed in NZ.

& i would totally agree that their service is not the best & they prosper because they are dominant. I'd argue they haven't needed to bother with service, just put their resources into protecting their monopoly & they'll retain all the customers by lack of any significant choice for consumers.

But in my mind Telecom aren't stupid, they've just been strategic. Resources formerly used to retain the monopoly will now be put into retaining customers. Customers are used to telecom's less than average service already & haven't switched, so there is mostly upside potential in making changes (after all at 100% customer satisfaction there is only one way for satisfaction to go & that is down).

Regulation is scary but it doesn't transfer their customers to rivals. Rivals must take the customers & that means overcoming years of consumer habit & the switching costs of changing to a new provider, not to mention having deep pockets etc etc.

So as an investor, I see the ball still sitting firmly in telecom's court because they are starting the new game holding all the customers (cards).

As they say, "The race doesn't always go to the swiftest, or the fight to the strongest, but that's the way to bet!"

Snoopy

01-12-2006, 01:08 PM

quote:Originally posted by kura

Therein lies the problem, a world class investment (return) extracted by an effective monopoly, at the expense of the long suffering (and increasingly hostile) consumers ( I can't wait to get naked DSL myself), now if most urban subscribers also opted for this, what would happen to these "world class" investment returns, pray tell me ?

No other provider has indicated a willingness to provide a nationwide competitive network to Telecom. That means newcomers to the market using naked DSL will be wholesale customers of Telecom. Providing that Telecom are not overcharging for their wholesale services, and my studies of proclaimations by Ofcom covering the market of Europe and the ACCC in Australia indicates thay are not, then Telecom will lose their retail margin. That would amount to a 10-15% drop in revenue from any customers that migrate from wholesale to retail, perhaps up to $50m per year in total all off Telecom's profits.

What the overall effect on profits will be depends on how these losses balance out against Telecom's new initiatives.

quote:
Snoopy, just as Stranger Danger, has obviously let his adverse experiences with Telecom cloud his investment thinking, are you not similarly clouded in your own thinking of Telecom, due to your substantial holdings ?

'Substantial holdings' in TEL? I guess they are substantial for me. Although I am still some orders of magnitude away from appearing on the shareholders top ten list I think!

Three years ago TEL *was* may smallest NZ shareholding. Now it is the largest with almost all of my subsequent purchases being made after studying the company and the industry in more detail. So you have the timeline wrong kura. I have my 'substantial holding' as a result of putting in the hours looking at the company's position, its prospects and very importantly its value and THEN deciding to buy.

quote:
Yes I know you have formulated various theories in the past to justify your TEL holding, and yes, you probably also took a bit of a hit over the last year or so, but have you ever considered what it would take for you to get out of TEL ? I'm not trying to be sarcastic, but merely asking if you have considered a point at wich you would get out (ie earnings below "x" limit )or would you just hold on forever regardless of earnings and share price?

I have articulated the view on this forum before that I regard Telecom as a kind of quasi 'bond'. When the TEL dividend yield goes significantly below the actual Telecom bond yield (Telecom debt is quoted on the NZ debt market), then I would think about reducing. The Telecom share price would need to rise above $6 to bring even that possibility onto the radar screen.

On the profitability side, TEL profits would have to halve before I would start to lose interest in the company as a recovery prospect.

Since both of those scenarios are unlikely in the forseeable future, I expect to be with TEL for some time. The only changes you will see on the share register in my own holdings are likely to be me, circumspectly building up my holding should the price dip.

[quote]quote:
To change tack, what I would like to see out of TEL, is for management to proactively embrace the recent reforms, and float off the seperate operational companies (retaining a (say) 50% interest in each o

duncan macgregor

01-12-2006, 01:42 PM

quote:Originally posted by Snoopy
Three years ago TEL *was* may smallest NZ shareholding. Now it is the largest with almost all of my subsequent purchases being made after studying the company and the industry in more detail. So you have the timeline wrong kura. I have my 'substantial holding' as a result of putting in the hours looking at the company's position, its prospects and very importantly its value and THEN deciding to buy.
On the profitability side, TEL profits would have to halve before I would start to lose interest in the company as a recovery prospect.

That process may have already started, so there is still time for you to come back on board kura at around $4.50 . Unless you consider paying a higher price for TEL shares after all details of the Yellow pages disposal are announced is 'the sensible thing to do'. Let's just see what happens.
SNOOPY
[/quote]
SNOOPY three years ago TEL share price was $5-20 on a market that was on a steep uptrend. Today your $5-20 share is worth $4-54 so that if you add your dividends then deduct inflation you are running at a loss. The market during this time remained on the uptrend your TEL shares lost money your analysis is worth nothing. The trouble with fundamental investing is that when you get it that wrong you have no policy to save yourself. Its like the SNOOPY of old when he took a hit he went down in flames. There is no requirement to go down in flames invest in a TA parachute. Next market crash will make you a sitting duck. macdunk

Snoopy

01-12-2006, 02:08 PM

quote:Originally posted by Stranger_Danger

The reality is, I do not need to stack Telecom up against any other Telco - I get to stack Telecom up against any other *company* that is listed on any exchange, anywhere.

"Include me out" is a valid investment choice, and when it comes to phone companies and your other example, utilities, it is usually my choice.

Fair enough Stranger Danger. I am not questioning the choice of not investing in utilities.

I invest in utilities for two reasons. The first is as a hedge against services I use in real life. There is far less pain if, for example, your power bill goes up when at the same time the dividend from the power company that you own shares in goes up in tandem as compensation.

The second reason is that the most comprehensive sector study I have seen, done in the US market over forty years or, showed that the sector that provided the best return over many business cycles was utilities. Note this is not the best risk adjuusted return. It was the *best return* period, beating retail, manufacturing, service, financial, agricultural, property, minerals, financials, high technology etc. etc.

I respect your decision to structure your investment portfolio as you see fit Stranger Danger. I do question though, how making a deliberate decision to leave out the very best performing sector of all might affect your long term returns?

quote:
I take your point that Telecom's service is probably no worse than Telstra in NZ, or the utilities.

However, I see the comparison as being similar to looking at abcd.com on a P/E of 100 back in '99 and saying "well, yahoo is trading at 300, so it must be ok"

You are right to point that just because I see Telecom NZ as the best value of the Telecom's, that does not necessarily rule out avoiding the whole sector as the way to go. I am guilty of falling into a very similar trap myself.

I managed to convince myself that because Air New Zealand was one of the world's best airlines it was OK for me to invest there, despite sixty global years of dismal investment performance from the international airline industry. It took reading about Warren Buffet's own forays into the airline industry to cure me of my Air NZ addiction.

While I agree with the logic of your argument, you have not considered the margins of safety involved with Telecommunications. The P/E at Telecom NZ is only 10, not 100 or (god forbid) 300! There is no 'speculative premium' built into telecommunications shares in general and especially Telecom in particular.

quote:
Bad service is bad service. Just because you can find other examples of bad service doesn't make it right!

To illustrate my point, lets take 4 groups - Telecom in NZ, Telecom in Australia, Telstra in NZ and Telstra in Australia.

Let us assume that the service is equally bad in all 4 cases - something I think we agree on?

Telecom in NZ - bad service, decent returns.

Telecom in Australia - bad service, awful returns.

Telstra in NZ - bad service, awful returns.

Telstra in Australia - bad service, decent returns.

The conclusion must be that service doesn't matter that much when you are the big kahuna with huge name recognition and a dominant near monopoly position.

In the real world however, service really, really matters

The more Telecom is exposed to the real world, the more it will matter. The less "monopoly" advantage they have, the more it will matter.

Allow me to

Major von Tempsky

01-12-2006, 02:13 PM

Yeah MacDunk but you only take that loss if u sell. If u don't sell and keep collecting the dividends the share rises to meet the sort of figure you are talking about. So if its a high yielder, and you are into other things for spectacular capital gain what's the beef....

duncan macgregor

01-12-2006, 02:27 PM

quote:Originally posted by Major von Tempsky

Yeah MacDunk but you only take that loss if u sell. If u don't sell and keep collecting the dividends the share rises to meet the sort of figure you are talking about. So if its a high yielder, and you are into other things for spectacular capital gain what's the beef....
To take that logic further you must think that feltex shareholders lost nothing that averaged down into oblivion.:D:D
macdunk

Snoopy

01-12-2006, 02:46 PM

quote:Originally posted by duncan macgregor

SNOOPY three years ago TEL share price was $5-20 on a market that was on a steep uptrend. Today your $5-20 share is worth $4-54 so that if you add your dividends then deduct inflation you are running at a loss. The market during this time remained on the uptrend your TEL shares lost money your analysis is worth nothing. The trouble with fundamental investing is that when you get it that wrong you have no policy to save yourself.

My policy was to buy more shares Macdunk, at around the $4 mark. It was my fundamental analysis that gave me the confidence to do so, when everyone else was running for the exits. If I had followed your advice and 'sold out', I would now be far worse off.

quote:
Next market crash will make you a sitting duck.

People are still going to use their telecommunications services when 'the market crashes' (whatever that means) Macdunk. Also you can be very sure that I won't be in a position of *having* to sell at the bottom of a slump, no matter what measly price Mr Market has on offer.

SNOOPY

Major von Tempsky

01-12-2006, 03:02 PM

So Feltex was a stable high dividend paying investment...
Can't remember ever being tempted to buy Feltex on any of its data...

duncan macgregor

01-12-2006, 07:53 PM

quote:Originally posted by Major von Tempsky

So Feltex was a stable high dividend paying investment...
Can't remember ever being tempted to buy Feltex on any of its data...
What we all must remember is that some companies go from good to better, while others go from bad to worse. If you are not in the position of inside information then it places you in a sitting duck position. Your fundamental analysis is worthless, being fed half truths, and straight out distortions. We never know this until it is to late ,so there fore the smart investor develops strategies to combat this. To hold TEL at this moment in time tells me that either you are a trader, or a sitting duck. The company is in a worse position than it was six months ago. The prospects are for a worsening position fundamentally. macdunk

Major von Tempsky

02-12-2006, 07:29 AM

Usually the best time to buy more are when the public think whatever is out of fashion.
You missed another category MacDunk - holder for income.

777

08-12-2006, 05:02 PM

Yahoo!

Long time since we have seen TEL up 15c in one day.

Lawso

08-12-2006, 08:57 PM

Why?

777

08-12-2006, 09:04 PM

I thought I gave a clue.

From stuff.co.nz

Telecom upbeat on Yahoo talks
08 December 2006

By TOM PULLAR-STRECKER

Telecom is understood to be confident a top-level shakeup at Yahoo in the United States will not derail negotiations between the companies for an online partnership that would help pave the way for the sale of Telecom's Yellow Pages business next year.

The companies are expected to announce before Christmas a deal under which Yahoo provides online search services and Web-based applications in conjunction with Telecom, though the exact nature of the alliance has not been spelled out.

Telecom chief executive Theresa Gattung in effect confirmed Yahoo as Telecom's future online partner last month, referring to that as the "worst-kept secret in town".

Yahoo has just announced a big executive shakeup and has promised to focus on fewer initiatives to spur growth and arrest a decline in its share price.

The online giant will restructure into three divisions focused on its website's audience, advertising network and technology.

Dan Rosensweig, the company's chief operating officer, will leave the company in March and Lloyd Braun, a former executive for ABC who ran Yahoo Media Group, has also resigned.

Senior vice-president Brad Garlinghouse blasted the company recently for losing its focus in an internal memo that was leaked to the media.

The memo was promptly nicknamed the "peanut butter manifesto" because it likened the company's recent strategy to "spreading peanut butter across the myriad opportunities that continue to evolve in the online world.

"The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular."

Mr Garlinghouse envisaged a reorganisation that would have laid off up to 20 per cent of Yahoo's 11,000 employees, but as yet no redundancies have been announced.

While Yahoo's market capitalisation has shrunk 30 per cent so far this year to US$37 billion (NZ$53 billion), arch-rival Google's market value has climbed by 17 per cent this year to US$149 billion (NZ$216 billion).

-with AP

Lawso

20-12-2006, 02:36 PM

Isn't it funny how the naysayers go quiet when they get it all wrong. The following was posted by MacDunk on 01/12, when Tel's sp was around 450. At the moment it's 492, nudging $5 :) And no one has contributed to this thread for nearly two weeks.

quote:To hold TEL at this moment in time tells me that either you are a trader, or a sitting duck. The company is in a worse position than it was six months ago. The prospects are for a worsening position fundamentally.

Major von Tempsky

20-12-2006, 03:02 PM

Hear hear, Lawso, just what I was thinking. It doesn't seem like all that long ago, after Hellengrad's initial blitzkrieg, when Tel was $3.99 and I was holding for income and cursing the Soialist government for expropriation without compensation.
They floated Tel with it owning and having sole rights to its network, now the Govt has blithely confiscated that without a single thought of compensation. Rather like the carbon credits and existing forest owners. I think they should reinstitute singing "The people's flag is deepest red" at Labour Party conferences and buddying up to North Korea and Cuba...

duncan macgregor

20-12-2006, 03:28 PM

quote:Originally posted by Lawso

Isn't it funny how the naysayers go quiet when they get it all wrong. The following was posted by MacDunk on 01/12, when Tel's sp was around 450. At the moment it's 492, nudging $5 :) And no one has contributed to this thread for nearly two weeks.

quote:To hold TEL at this moment in time tells me that either you are a trader, or a sitting duck. The company is in a worse position than it was six months ago. The prospects are for a worsening position fundamentally.
LAWSO, I have been telling you all the way down to get out, now because we have a dead cat bounce you want me to say I am wrong.:D:D. If the dollar drops you might learn something. macdunk

Deev8

20-12-2006, 03:35 PM

quote:Originally posted by duncan macgregor

LAWSO, I have been telling you all the way down to get out, now because we have a dead cat bounce you want me to say I am wrong

A dead cat bounce? - from below $4 to $4.90, 22% is one hell of a dead cat bounce.

duncan macgregor

20-12-2006, 03:41 PM

quote:Originally posted by Deev8

quote:Originally posted by duncan macgregor

LAWSO, I have been telling you all the way down to get out, now because we have a dead cat bounce you want me to say I am wrong

A dead cat bounce? - from below $4 to $4.90, 22% is one hell of a dead cat bounce.
They take a lot of killin having 9 lives. :D:Dmacdunk

Snoopy

20-12-2006, 08:01 PM

quote:Originally posted by Major von Tempsky

It doesn't seem like all that long ago, after Hellengrad's initial blitzkrieg, when Tel was $3.99

They floated Tel with it owning and having sole rights to its network, now the Govt has blithely confiscated that without a single thought of compensation.

Whether Telecom is going to be disadavantaged with unbundling will depend on the wholesale access price Telecom will charge the competition Major. That charge will have the heavy hand of government all over it to be sure, but we don't know what it is yet. Most people assume Telecom is currently 'grossly overcharging'. But measure up what Telecom is doing compared to what is currently happening in Australia and Europe and I am not so sure.

Now the bluff of the other Telco players has been called, it is interesting to see who has committed to putting some of their own money into the network. Call Plus has said they are not going to spend anything. Vodaphone/Ihug, the number two player, is talking $NZ30m. That is a start but pales in comparson with the $750m odd that Telecom plans to spend over the same period.

In the fashion parade of Emperors, Telecom will be showing off some nice new robes, Vodaphone will be parading in a new pair of underpants and the rest of them will be parading in, well, exactly what the small boy said.

Add the 28.5c of dividends we have received since the unbundling announcement to the $4.88 closing share price today and we get $5.165. Sure that is down from where the share price was trading pre unbundling bomb by 33.5c or so. But considering the magnitude of the 'bomb' dropped, we income investors have got of lightly (although just possibly the fact that Telecom was cheap all along and so didn't have far to fall whatever the bad news might have had something to do with it). And with the kiwi dollar looking to rise further against the US dollar over the summer, and TEl acting as a proxy for investing in NZ, the TEL share party may not be over yet.

SNOOPY

discl: hold TEL, and topped up during the 'dip'.

warthog

20-12-2006, 08:22 PM

The hog has been surprised at the resilliance in the TEL shareprice, so it's back to the drawing-board to look for the value that the market obviously sees in TEL, and why the hog isn't quite so up-beat as the market is about TEL in general.

One ISP who is investing heavily - relatively speaking - is Orcon. It's relative to their position and scale of operation. All very well to say that the incumbant is investing a massive $750m compared to the peanuts of the small players, but one should bear in mind the dominance of the big players and the very real need to make that investment to protect - as best they can - their existing market-share.

metro

20-12-2006, 10:39 PM

quote:Originally posted by Snoopy
[SNOOPY

discl: hold TEL, and topped up during the 'dip'.

or in other words "averaged down". And if that's your "strategy" Snoopy don't worry over the next 5-10 years you will get plenty more chances to do that..

In a residential environment...used your telephone recently??? The teephone will go the same way as the fax machine. AAPT is struggling likes theres no tomorrow. And the ads for Ferrit are just an embarrasment. Unbundling is here...naked DSL will soon be here. Directories will be flogged off (big mistake) and....

metro

21-12-2006, 07:58 AM

Telecom woes get worse....

Telecom customers hit by e-mail delay
By SUE ALLEN - The Dominion Post | Thursday, 21 December 2006

elecom customers have been hit by another setback, with a fault in an international connection causing e-mail delays and failed Internet access.

Aaron Gascoigne, from Auckland-based fund manager WRF, who uses Telecom's Xtra service to connect with his company's Australian offices, said he had been unable to get any international connections for six hours yesterday.

He could only gain access to New Zealand sites with .co.nz addresses through his Xtra service, "which makes it useless for my business".

"New Zealand has been cut off from the outside world effectively."

Mr Gascoigne said he had also struggled to get through to Telecom's Xtra helpdesk for advice on what was going on.

If the outage had come at a busy time it would have been "catastrophic", he said.

Telecom spokeswoman Sarah Berry said there had been a fault with an international router, between noon and 2.40pm.

Mr Gascoigne said his service was out from 9.20am till about 3.30pm.

A router is a device that directs traffic, in this case, on the international network.

Ms Berry said the fault would have caused intermittent loss of access to international websites for some customers.

Some e-mail users - both Xtra customers and those who bought services through Telecom's wholesale customers - may have experienced a delay in sending and receiving e-mail messages.

Ms Berry said Telecom did not know how many customers had experienced problems, but there had been a "significant spike" in the number of calls to its help desk over lunchtime.

Xtra has been hit by problems recently, with delays to e-mail delivery sometimes running to days.

Telecom said that a flurry of spam e-mails had made it difficult for some servers to connect to Xtra.

Snoopy

21-12-2006, 08:38 AM

quote:Originally posted by metro

In a residential environment...used your telephone recently??? The telephone will go the same way as the fax machine.

The question is not 'have I used my residential telephone recently?' but 'am I going to get rid of it?'

The trend now amongst global telco is to offer free call access packages. Of course the calls aren't really 'free'. You just pay a higher fixed fee. And the Telco collects their profits whether you use their phones or not! Telecom NZ is well ahead in this game as we have always had 'free' calls here.

quote:
AAPT is struggling likes theres no tomorrow. And the ads for Ferrit are just an embarrasment.

It is not all rosy. Telecom does have issues.

quote:
Unbundling is here...naked DSL will soon be here.

So more Telecom customers move from retail to wholesale. There will be a reduction in margin, but it is not the end. Even if you really want to leave Telecom and they no longer send you bills after you move providers, that doesn't mean Telecom will no longer profit from you!

quote:
Directories will be flogged off (big mistake) and....

BT in UK flogged of their yellow pages, and banked the money. Then a few years down the track started up their own directory again called 'The Phone Book'. Telecom could do the same.

SNOOPY