TEL v TLS

[Major von Tempsky]

$2.50. Hoom, Hum, its a puzzle. I did a search to see what the bad news is apart from going ex a 9cps dividend.
Nothing. I read today's NZH piece but it only contains positives.

Maybe some people are frightened because Paul Reynolds is going next year? Not so long ago there was a howl for his departure!
Or some NZ$ play where overseas speculators use TEL as a proxy for the NZ$ and it's time to take profits on the NZ$?
Or frightened because there is an approaching demerger?

Or frightened of their own shadow? I used to note how selling pressure came in each day onto the NZX at lunch time and used to imagine a number of little old ladies cowering under the bed reading Revelations only to emerge at lunchtime screaming Sell! Sell! Sell everything! For anything you can get!
But now I know that that wave comes from Australia so that there are a number of little old Australian ladies cowering under the bed reading Revelations only to emerge at Australian morning tea time screaming Sell! Sell! Sell everything! For anything you can get!

At $5m a year I should imagine Telecom Retail would be able to get someone effective who is a lot cheaper than that, hopefully internal who knows the business already, is performing well and will hit the ground running!

Hoom, hum, I see the bottom feeders are chewing away already and I'm too late to buy at $2.50. Blast! Never mind I'll wait for the little old Australian lady effect at lunchtime and buy then.....

[Major von Tempsky]

Radio NZ National News had a pretty good run down on it in midday news business section.

It's not an NZ$ play, its strong at over 85cents US, its not heart rending tears over Paul Reynolds departure - both TUANZ and the broker said that had been expected.

Its because the more detail just released showed that less of the demerged entities earnings came from Chorus than expected and more from Telecom Retail.

This apparently is a bad point because Chorus is very good as a defensive earner but Telecom Retail is more open to competition.

Time for Duncan McGregor to leap in boots flying and say I told you so?

Enjoy your lunch mes amis....

[BIRMANBOY]

Its all those flipping traders!! They just cant control those greedy instincts. Creates too much volatility and starts me thinking about why I should be trading instead of investing..... Oh well I guess it drives up their average holding price since each time they go back its usually at the next level up from before. I can only console myself with a low holding price which hopefully will translate into higher % dividend returns over the years. it is tempting though.

[Snoopy]

Investing in Telstra (TLS) means you will become an investor in ‘Telstra Retail’, as the existing Australian fixed line network is gradually absorbed into this new ‘New Broadband Network’ (NBN) entity. That’s OK except that for quite a long time Telstra will be a dying network/half retail company. I am not sure how easy such a company will be to manage.

The $11b ‘sweetener’ (equating to 88c/share) that the Australian Government has offered Telstra will certainly ease the transition pain for TLS shareholders.

In summary, this thread began by analyzing which of TLS or TEL would be the better investment and the answer turned out to be ‘neither’. My feeling is that asking the same question in 2011 will lead to ‘both’ being the right answer. But my feeling is that for New Zealand based shareholders it is Telecom that will prove the slightly better investment going forwards. I nevertheless reserve the right to flip flop on my choice.

I seem to have flip flopped. As attractive as Telecom is I put some more money into Telstra a couple of days at $A3-. Now the NZ/AUD exchange rate has bounced off its lows I think the certainty of that Telstra cash flow is just too important to ignore in uncertain times.

There is some political risk that should the Gillard government fall then then the Liberals might renegotiate the NBN agreement. But there will be compensation to Telstra should that happen, and it is not guaranteed that Telstra will be worse off anyway. Of course I continue to hold Telecom2/Chorus 2 as well.

SNOOPY

[troyvdh]

....wriggle wriggle...big yawn....snort...scratch...scratch....scratch...... ...scratch.....big yawn.....sniffle.....sniffle.....another scratch.......yawn.......asleep.....

[BIRMANBOY]

Aha...so thats why you are #100 out of 100.. :-)

....wriggle wriggle...big yawn....snort...scratch...scratch....scratch...... ...scratch.....big yawn.....sniffle.....sniffle.....another scratch.......yawn.......asleep.....

[troyvdh]

...fair call.....however ...in my defence...i travel a bit...be it Kashmir,turkey,austria,athens,tanzania...and a few more...later this year I am biking through Cuba...Panama...next year is Jordan and crete...where everyman and his dog has a cell phone ...and uses it....its my understanding that in NZ Vod and TEL make most of there profits from Txting....and why ?...because the cost of calls is to expensive....now that is a surprise...

What am I saying....

..we are and always have been ripped off by these pricks...I just hate them...cheers

[Major von Tempsky]

http://www.theaustralian.com.au/nati...-1226127709557

[Snoopy]

http://www.theaustralian.com.au/nati...-1226127709557

Major, as a Telstra shareholder I would be happy with a net benefit of nearly $A5b. But with $A11b apparently on offer from the Liberals, it is hard not to join the ‘Gillard should go’ bandwagon. Even given I don’t live in Australia and am ambivalent about Australian politics!

Telstra is such a huge company it is hard to comprehend in scale for the average New Zealander. Billions of dollars in any headline sound impressive. But the annual 28cps dividend represents an annual payout of $A3.5billion in cash to shareholders every year. So $11b over 30 years doesn’t go as far as it sounds. It equates to 88cps total, or near enough to 3cps per year.

Nevertheless the surety of an $11b cashflow, or $5b over a shorter timeframe, will be very useful for Telstra. Development of new income streams, as the traditional income streams become less important, is a requirement of the telecommunications industry restructuring process. Certainty of cashflow from the Australian government will equate to certainty of funding for new business unit development. Meanwhile Telstra’s mobile network, already a strong growth engine inside the company and separate from NBN will remain a Telstra exclusive, completely outside of NBN.

With TelstraClear in New Zealand seemingly an endless loss maker, I can’t see imputation credits ever being available to NZ domiciled Telstra shareholders. But a 28cps dividend on a share bought for $3.05 still represents a New Zealand investor gross yield of over 9%. Try getting anything like that from bank term deposits. I think as a New Zealand income investor, it is very hard to construct an argument to leave Telstra out of your portfolio mix.

SNOOPY

[Major von Tempsky]

Luckily I held off on buying TEL and now I'm looking for an even better bargain à la Martin Hawes in the SST yesterday.

The market hates uncertainty and that's what there is until the data for TEL's separation is available - when, how, how much, projected earnings, dividends and imputation credits.

With any luck the market will get really fidgetty over this and I can snap up a bargain!