TLS

[Snoopy]

P.S. Peat for your information those Telstra mobile towers have been 49% sold off as of 1st September 2021 to pension funds. From AR2022 p2
"The sale of a non-controlling interest in the Amplitel tower business (raised) $A2.8billion."

I want an answer to the question, "What was the overall benefit to Telstra shareholders from the Amplitel transaction?" But first, let's detail what the transaction was.

From AR2022 p149. "On 30 June 2021 we announced that a consortium comprising the Future Fund, Commonwealth Superannuation Corporation and Sunsuper agreed to acquire a 49% interest and become a strategic partner in Telstra's tower business (Amplitel)."
"The sale of the 49% interest in Amplitel to the consortium was completed on 1st September 2021 and resulted in $2,883m net cash proceeds."
"As at 1st September we recognised $798m non-controlling interests" (in Amplitel, representing the value of the 49% non-controlling interest held by Telstra, on the day before the 49% stake was sold))"

This means the total value of the Towers on the Telstra books immediately before the sale was: $798m/0.49 = $1,629m
By contrast, the total value of the Towers immediately after the sale was: $2,883m/0.49 = $5,884m, with 51% of that value still owned by Telstra and 49% of that value now in the hands of the pension fund conglomerate.

The gross profit on the sale deal for Telstra shareholders was therefore: $2,883m - $798m = $2,085m. But of course this was only for the 49% stake sold. The 51% stake retained also increased in value by: $2,085m x (51/49) = $2,170m. This is recognition of Telstra's remaining controlling stake being recognised at a new enhanced value, courtesy of Telstra selling off the 49% minority stake of the towers at a good price, and so defining the Amplitel deal. The total gain to Telstra from this deal was therefore: $2,085m + $2,170m = $4,255m.

On p158 of AR2022, we learn that: "Telstra Entity recognised a $4,058m net gain on the sale of the towers business." So the cost to Telstra of selling the 49% minority stake in the tower business must have been: $4,255m - $4,058m = $197m. $197m is higher than the $125m referred to as transaction costs in AR2022 p25. I am not sure why there is an inconsistency between those two figures. Maybe there were some capitalised legal expenses setting up the 'Towers Business Operating Trust' as the legal owner of the towers, where the company we think of as the tower's owner -Amplitel- is the trustee? IOW, setting up the 'Towers Business Operating Trust' was treated as a 'capitalised investment', rather than an 'expense'? (All pure speculation, I really don't know the answer.)

One thing that really amazes me about this Amplitel deal is the difference between the 'before' and 'after' sale situation.

Before: 100% of Amplitel was valued on the Telstra books at: $798m + (51/49)$798m = $1,629m
After: 51% of Amplitel is then valued on the Telstra books at: (51/49)$798m + $2,170m - $197m = $2,804m

So despite Telstra selling that 49% Amplitel stake, the value of Amplitel still on the Telstra books has increased by nearly $1.2billion! "Money for nothing, that's the way to do it!" (quote from Mark Knophler, financial adviser).

SNOOPY

[peat]

kind of amazed you can figure out the EBITDA of Telstra Health, but not surprised its running at a loss. I was thinking when I read your post about how good Telstra Management would be at choosing buying and managing these health companies. But who knows eh, could be something in a few years.

Re mobile pricing, I've never been one to change for the sake of a few bucks, and I dont know if its like that in Australia or not, but it has always seemed to me the incumbent has some technical advantage over the competitors and the retailers who bundle and re-sell. Possibly less and less as time goes on but essentially, to me , there is some premium in the Telecom, now Spark, or the Telstra brand. So given the obvious price differences it will be interesting to see if users migrate to Opt or VF.

[Snoopy]

Information on Telstra's borrowings may be found under note 4.4.1 in the annual report. The borrowings are split between unsecured notes, unsecured bank and other loans and unsecured commercial paper. There is no detail given as to who these loans are with, nor any specifics about loan maturity dates (apart from a current and non-current disclosure). That the detail reporting is so sparse, compared to the likes of the Spark annual report where all loans are laid out in great detail as regards size and maturity, I find odd. Different accounting disclosure requirements on each side of the Tasman? No matter. The information I need is there (supplemented by information from the half year report).

	FY2022	HY2022	FY2021
Current Liabilities	$2,690m	$4,129m	$3,631m
Non Current Liabilities	$8,292m	$8,003m	$10,505m
Total	$10,982m	$12.132m	$14,136m

By averaging the three totals, I get a triangulated approximation to the average loan balance during the year.

($10.982m+$12,132m+$14,136m) / 3 = $12,417m

The total loan interest bill for the year was $444m (AR2022 p100)

This gives an implied average interest rate over all borrowings for year FY2022 of: $444m / $12,417m = 3.58%

SNOOPY

[Snoopy]

That 'housing market scenario' in the post title sounds a little odd. Yet if we stand back and look at the Amplitel sales transaction, it is a fairly good analogy as to what happened. Telstra set up a special company - Amplitel - to own its cellphone mobile service towers. It then got in a new half owner of the assets, from which it took just under half of a full asset valuation, in compensation for letting go a 49% stake. But Telstra cannily retained a 51% controlling stake, to make sure they retained governance rights, and could say exactly what they wanted to do with those towers - indefinitely. So a nice deal stitched up by Telstra!

In AR2022 p152, there is a 'Table A' titled "Amplitel Business". The introductory paragraph says " summarises financial information of the entities which have material non-controlling interests, i.e. the Trust and Amplitel (Amplitel business), amalgamated for the year ended and as at 30 June 2022."

'Non-controlling interests' suggests the coalition of pension funds that hold the 49% minority stake. My reading of this is that this table represents that 49% minority stake only. That means if you want to find out the figures for the whole Amplitel company, you have to divide every figure in that table by 0.49. However, rather confusingly, the 'Statement of Comprehensive income' which I reproduce below, refers to some table figures specifically as 'minority interest figures', which almost implies that the figures not qualified with that tag are not:

Apritel FY2022: Statement of Comprehensive Income

Revenue	$141m
Loss/Total Comprehensive Income for the period	($157m)
Profit allocated to non-controlling interests	$83m
Distributions paid/payable to non-controlling interests	$87m

Quite frankly, I find the above statement baffling. First we are told that Amplitel made a Comprehensive Income loss for the year. Then on the next line we are told that 'Profit allocated to non-controlling interests' (an odd thing to say if the whole table only relates to non-controlling interests) was a positive number! (I further note that 49% of $157m is NOT $83m). Then, to top it off, the dividend paid, to the non-controlling interest was 105% of profit. Why and how would a real estate company (for that's what Amplitel is- towers are really just real estate) pay out more than the rent received in dividends?

There are other things that don't add up too. If $149m represents the revenue earned from a 49% interest in those towers, and we know the market value of that 49% tower stake is $2,883m (see post 41), that means the underlying gross earnings yield on this investment is not that attractive:
$149m / $2,883m = 5.2%

Meanwhile the gross dividend yield (apparently unsustainable) is significantly worse:
$87m / $2,883m = 3.0%

A 3.0% dividend yield seems very low for a utility type asset. Given this, my feeling is that the 'coalition of pension funds' look to have paid too much for their stake in Amplitel, notwithstanding the fact that this dividend was pulled out of a business unit that was making an underlying loss (how does that work?). I would appreciate readers opinions as to exactly what this 'Amplitel Comprehensive Income' table is showing, as I remain baffled.

Not being able to figure out what is going on here, I am forced to revert to a more simplistic overarching argument. I am not sure that I know what the overall revenue stream delivered by Ampritel is. But do I need to know this? No matter what Ampritel charge for the use of their towers, the 49% of dividend that will flow out the door to third party minority interests, will be equally matched by the 51% of the dividend paid back to Telstra as a 51% Amplitel shareholder. The 49% dividend out will always be matched and cancelled out on a cashflow basis by the 49% + 2% of dividend retained. That means from a 'Telstra cashflow perspective', there is no need to know what the Amplitel dividend is. Have I got that right?

SNOOPY

[Snoopy]

There were two main benefits.

1/ From AR2022 p2, p28: "$1.35 billion was also returned to shareholders via an on-market share buy-back following the sale of a non-controlling interest in our Amplitel towers business for $2.8 billion."
From AR2022 p122 "The buy-back was conducted in the ordinary course of trading at an average price per share of $3.98. The shares bought back were subsequently cancelled."

This means $1,350m/ $3.98 per share = 339.2m shares were bought back.
The reduced number of Telstra shares on issue after the buyback was: 11,893.3m - 339.2m = 11,554
This means 'earnings per share' will subsequently increase indefinitely by a multiplier of: 11,893/11,554 = 1.0293 or 2.93%

2/ From AR2022 p149: "The $2,085 million difference between the amount recognised as non-controlling interest and the consideration received was recognised in general reserve within equity attributable to the Telstra Group." "General reserve" or 'Reserves" refers here to a sub category of equity that may be found in the balance sheet. We already know that $1.35m of this profit was spent on a share buyback. That means the rest of the cash payment, now that 49% of Amplitel has been sold off, can be used to reduce debt. So debt can be reduced by: $2,883m - $1,350m = $1,533m. From post 43, the indicative interest rate on this Telstra debt is 3.58%. So the annual interest saving as a result of this debt reduction amounts to: $1,553m x 0.0358 = $56m. Since interest is a tax deductible expense, at the Australian corporate 30% tax rate, this means after tax profit at Telstra will increase by 0.7x $56m = $39m on an annualised basis.

As a percentage of the annual normalised profit for FY2022, this amounts to an incremental $39m/$1,645m = 2.37%

There is a third factor in this equation. Namely Telstra will have to pay 'rent' to the entity Amplitel, before claiming their share of 51% of any 'profit' made by Amplitel back. Post 44 explores this issue. For now, it looks to me as though the rent paid to Amplitel is a non-issue for reasons discussed in that post.

We can now use these bullet points 1/ and 2/ to obtain our answer, by multiplying (not adding) the two effects together:

Incremental earnings gain multiple from Amplitel transaction = 1.0293 x 1.0237 = 1.0537

Let's go back to round numbers. The benefit for the Telstra shareholder for selling the 49% Amplitel stake has resulted in underlying earnings per share rising by 5%. (Not insignificant)

But what was the resulting balance sheet effect of these transactions?

SNOOPY

[JeffW]

That 'housing market scenario' in the post title sounds a little odd. Yet if we stand back and look at the Amplitel sales transaction, it is a fairly good analogy as to what happened. Telstra set up a special company - Amplitel - to own its cellphone mobile service towers. It then got in a new half owner of the assets, from which it took just under half of a full asset valuation, in compensation for letting go a 49% stake. But Telstra cannily retained a 51% controlling stake, to make sure they retained governance rights, and could say exactly what they wanted to do with those towers - indefinitely. So a nice deal stitched up by Telstra!

In AR2022 p152, there is a 'Table A' titled "Amplitel Business". The introductory paragraph says " summarises financial information of the entities which have material non-controlling interests, i.e. the Trust and Amplitel (Amplitel business), amalgamated for the year ended and as at 30 June 2022."

'Non-controlling interests' suggests the coalition of pension funds that hold the 49% minority stake. My reading of this is that this table represents that 49% minority stake only. That means if you want to find out the figures for the whole Amplitel company, you have to divide every figure in that table by 0.49. However, rather confusingly, the 'Statement of Comprehensive income' which I reproduce below, refers to some table figures specifically as 'minority interest figures', which almost implies that the figures not qualified with that tag are not:

Apritel FY2022: Statement of Comprehensive Income

Revenue	$141m
Loss/Total Comprehensive Income for the period	($157m)
Profit allocated to non-controlling interests	$83m
Distributions paid/payable to non-controlling interests	$87m

Quite frankly, I find the above statement baffling. First we are told that Amplitel made a Comprehensive Income loss for the year. Then on the next line we are told that 'Profit allocated to non-controlling interests' (an odd thing to say if the whole table only relates to non-controlling interests) was a positive number! (I further note that 49% of $157m is NOT $83m). Then, to top it off, the dividend paid, to the non-controlling interest was 105% of profit. Why and how would a real estate company (for that's what Amplitel is- towers are really just real estate) pay out more than the rent received in dividends?

There are other things that don't add up too. If $149m represents the revenue earned from a 49% interest in those towers, and we know the market value of that 49% tower stake is $2,883m (see post 41), that means the underlying gross earnings yield on this investment is not that attractive:
$149m / $2,883m = 5.2%

Meanwhile the gross dividend yield (apparently unsustainable) is significantly worse:
$87m / $2,883m = 3.0%

A 3.0% dividend yield seems very low for a utility type asset. Given this, my feeling is that the 'coalition of pension funds' look to have paid too much for their stake in Amplitel, notwithstanding the fact that this dividend was pulled out of a business unit that was making an underlying loss (how does that work?). I would appreciate readers opinions as to exactly what this 'Amplitel Comprehensive Income' table is showing, as I remain baffled.

Not being able to figure out what is going on here, I am forced to revert to a more simplistic overarching argument. I am not sure that I know what the overall revenue stream delivered by Ampritel is. But do I need to know this? No matter what Ampritel charge for the use of their towers, the 49% of dividend that will flow out the door to third party minority interests, will be equally matched by the 51% of the dividend paid back to Telstra as a 51% Amplitel shareholder. The 49% dividend out will always be matched and cancelled out on a cashflow basis by the 49% + 2% of dividend retained. That means from a 'Telstra cashflow perspective', there is no need to know what the Amplitel dividend is. Have I got that right?

SNOOPY

Hi Snoopy - good analysis. I do not know in this instance, but the fact that there is a loss incurred but a dividend paid is quite possibly because the loss is a result of depreciation and/or amortisation, resulting in an accounting loss, but a cash profit. Certainly, that is sometimes the case with REITs

[Snoopy]

There were two main benefits.

1/ From AR2022 p2, p28: "$1.35 billion was also returned to shareholders via an on-market share buy-back following the sale of a non-controlling interest in our Amplitel towers business for $2.8 billion."

2/ From AR2022 p149: "The $2,085 million difference between the amount recognised as non-controlling interest and the consideration received was recognised in general reserve within equity attributable to the Telstra Group

But what was the resulting balance sheet effect of these transactions?

If you look at the "Statement of Changes in Equity" for FY2022 (AR2022 p82), then both of the 'capital adjustments' referred to in the quoted post above '1/' and '2/' are prominent. The $1,350m buyback is shown as removing that amount from share capital, while $2,084m in profit (I presume the reduction from $2,085m is a rounding error) is shown as being added to reserves. But a quote from the annual report is bothering me.

From AR2022 p158. under a section titled "Strategic partner in Telstra's tower business"
(Talking about the Amplitel transaction) "As a result the Telstra Entity recognised a $4,058m net gain on the sale of the towers business"

It looks like close to $2billion ($4,058m - $2,084m = $1,974m) has 'gone missing' between being 'recognised' and 'showing up in the balance sheet'. Could a search down the back of the couch at Telstra head office be in order?

Now, I feel it is fair to disclose at this point that I am not an accountant (apart from my C+ pass in an ACCY101 paper back in year 19mumble mumble). But my reading of the accounts is that:

a/ Because: the equity holding of Telstra in Amplitel is more than a controlling stake (51% in this instance), THEN
b/ Amplitel is treated as a subsidiary of Telstra for accounting purposes, and is fully consolidated in the Telstra accounts.
c/ Thus the 'equity accounting rule' where the 'fluctuation in the value' of that investment is required to be recorded in the accounts annually - i.e. 'marked to market'- does not apply. (It may not have applied anyway because apart from the acquisition transaction, the shareholding of Amplitel is expected to remain stable as the shares are privately held. I.e. there is no 'ready market' from which an annual valuation price can be recorded.)
d/ However in future years, any dividend that Telstra receives from Amplitel is deducted from the Telstra equity 'Reserves' on the balance sheet (standard accounting practice I believe, doesn't really make sense to me, but I will go with it nevertheless).

AR2022 p149 more or less confirms this: "We retain control of the Trust and Amplitel and thus we continue to consolidate these entities."

The question now is, if my interpretation of the accounting rule representation of the 51% owned Amplitel subsidiary is correct, what happened to the missing $1,974m? Any budding Sherlock Holmes out there care to comment?

Below is a reminder of where the *four* billion dollar gain resulting from the sale of the 49% of Amplitel stake came from.

The gross profit on the sale deal for Telstra shareholders was therefore: $2,883m - $798m = $2,085m. But of course this was only for the 49% stake sold. The 51% stake retained also increased in value by: $2,085m x (51/49) = $2,170m. This is recognition of Telstra's remaining controlling stake being recognised at a new enhanced value, courtesy of Telstra selling off the 49% minority stake of the towers at a good price, and so defining the Amplitel deal. The total gain to Telstra from this deal was therefore: $2,085m + $2,170m = $4,255m.

On p158 of AR2022, we learn that: "Telstra Entity recognised a $4,058m net gain on the sale of the towers business." So the cost to Telstra of selling the 49% minority stake in the tower business must have been: $4,255m - $4,058m = $197m.

SNOOPY

[Snoopy]

Hi Snoopy - good analysis. I do not know in this instance, but the fact that there is a loss incurred but a dividend paid is quite possibly because the loss is a result of depreciation and/or amortisation, resulting in an accounting loss, but a cash profit. Certainly, that is sometimes the case with REITs

Thanks for the suggestion JeffW. I see on 108 of AR2022 the depreciation life of 'buildings' is listed as 30 years, while the corresponding figure for 'communications assets' is 25 years. I am not sure where cell phone towers fit into that picture. But if I go with towers as 'buildings' and,

1/ We know the superannuation conglomerate spent $2,883m acquiring their 49% share AND
2/ We assume the towers are half way through their accounting depreciation life (a 'fact' I just made up)

Then if we expect the depreciation and any associated goodwill to expire in 15 years, that means the D&A written off each year will be: $2,883m/15= $192m per year. If we return to the Amplitel business disclosures in AR2022 p152, that shows profit allocated to non-controlling interests of $83m. But take off a D&A charge of $192m and it turns into a loss. Looks like you might be into something. Thanks.

SNOOPY

[Snoopy]

kind of amazed you can figure out the EBITDA of Telstra Health, but not surprised its running at a loss. I was thinking when I read your post about how good Telstra Management would be at choosing buying and managing these health companies. But who knows eh, could be something in a few years.

I find it often a realistic assumption to make that if a company is coy about telling you the profitability of an 'exciting new division', then there is a very good chance that division is loss making ;-) This is not at all unusual amongst the latest generation of 'software as a service' providers that beaver away for years building up sales to meet their cost base, at which point profitability can suddenly explode. However, it is a high risk game and you never really know if a competitor, be they in Israel, or down the road in Dunedin have a superior product that will suddenly 'take over the world' and render your own software product a backwater dead end. It won't be a surprise to readers, to learn that I do not invest in such companies, no matter how good their presentations look. However, I won't sell out of Telstra, because they see a future for software company TelstraHealth. In this instance, I see 'TelstraHealth' as a 'free option' on a business unit that has a reasonable chance of success. I wouldn't have a clue how TelstraHealth stacks up against other multi-national options out there. So I have to assume Telstra management know that they are doing. And as long as Telstra itself will not fall over, even if TelstraHealth does, then I am prepared to back Telstra management risking some of my Telstra capital on this venture.

As for calculating that TelstraHealth lost $193m over FY2022, that is very likely a 'worst case' scenario. I am not saying my calculation is wrong. I am saying that if I make slightly different assumptions I can get a different answer. For example, in my calculation below, if I had decided that the gain on property plant and equipment represented a 10% not a 100% gain, (although conceptually that might require me to declare the gross sales proceeds as revenue, not just the profit - but let's just put this point aside for now), then my calculation on margin for TelstraHealth changes. (Quoted old calculation is followed by new calculation).

Page 25 in AR2022 gives an 'income' break down of 'Other' of $755m. For income we are not talking about NPAT or even EBITDA, but more generally 'revenue'. Looking at the segmented results table, AR2022 p88, and we can see that his $755m Telstra contained inter-divisional sales. Take those out and the sales to external customers were $464m.

The EBITDA contribution margin for the total 'Other' earnings for FY2022 (AR2022 p23) was 6.3%, where the:
"Contribution Margin Percentage = (Total Sales Revenue – Total Variable Costs) / Total Sales Revenue

For all entries in the table except Telstra Health, the net revenue from the sum of these, $221m is the EBITDA contribution. That $221m has a contribution margin percentage of 100%, (because all those figures are net of costs). Weighting this sum against the Revenue from Telstra Health at at unknown contribution margin 'C', the following equation must hold:

C x $243m + 1.0 x $221m = 0.06 x $464m => C = -0.79

This means the TelstraHealth EBITDA loss for the FY2022 year was: -0.79 x $243m = -$193m.

C x $243m + 0.1 x $165m + 1.0 x $56m = 0.06 x $755m => C = -0.11

This means the TelstraHealth EBITDA loss for the FY2022 year was: -0.11 x $243m = -$27m.

Such is the kind of drastic change in profit margin, when the word 'revenue' is used interchangeably with the word 'profit', as Telstra seems to do when assessing 'other' segment performance. The problem I have is that 'other' is used as a 'catch all basket' for any sources of revenue (or is that profit?) which Telstra has that don't fit neatly into other baskets. So defining what profit margin really means can become a problem in itself.

Let's now approach the profitability of TelstraHealth from a totally different angle. A rule of thumb I use when looking at traditional service industry costs is that if you take your employees average salary and then you should double that, to allow for the costs of renting a space for your employee to work in, providing the equipment they need to do the work , and then add in secretarial and billing support, transport and accommodation away. IT people tend to be highly paid all through an organisation. So I would reduce my 'fudge factor multiplier' down from 2.0 to 1.5.

We know TelstraHealth now has 1,400 staff across 15 locations. So if we take an average pay rate across all employees to be $100k that adds up to an annual 'cash cost' of running the TelstraHealth business of:

1,400 x $100k x 1.5 = $210m

I guess there would be plenty of high tech hardware at the office that might depreciate rapidly that might add abnormally to costs too! So if revenue was $243m but the loss for the year was ($193m), that means the cost of running the business must have been $243m + $193m = $436m. That is quite a bit higher than my estimate of $210m. That could mean my formula of estimating the cost of running the business gives a result that is too low, or my estimate of business losses is somehow too high. Then there is always the third option which comes down to me having no idea what I am talking about. I am willing to hear other's views. Otherwise it might be time to bring out the monkey and the dartboard for estimating the profitability of TelstraHealth.

SNOOPY

[Snoopy]

There were two main benefits.

1/ From AR2022 p2, p28: "$1.35 billion was also returned to shareholders via an on-market share buy-back following the sale of a non-controlling interest in our Amplitel towers business for $2.8 billion."

'earnings per share' will subsequently increase indefinitely by a multiplier of: 11,893/11,554 = 1.0293 or 2.93%

2/ We already know that $1.35m of this profit was spent on a share buyback. That means the rest of the cash payment, now that 49% of Amplitel has been sold off, can be used to reduce debt. So debt can be reduced by: $2,883m - $1,350m = $1,533m.

As a percentage of the annual normalised profit for FY2022, this amounts to an incremental $39m/$1,645m = 2.37%


We can now use these bullet points 1/ and 2/ to obtain our answer, by multiplying (not adding) the two effects together:
Incremental earnings gain multiple from Amplitel transaction = 1.0293 x 1.0237 = 1.0537

Some of you may be wondering why I have been spending so much time on what is now an historic event - the selling off of a 49% stake in Cellphone tower company Amplitel.
The following question from Eric Choi from Barrenjoey, made at the HY2023 shareholder meeting should enlighten you as to why.

https://www.telstra.com.au/content/d...transcript.pdf

"I’ve got to ask on InfraCo. I think previously we’ve centred our questions to you around whether you would do a transaction, and when. This time, I wanted to ask, how much? And my thinking is, most of us, I guess, value InfraCo Fixed probably $15 billion plus. And if you guys sold, let’s say a little bit less than half of that, you’d get $7 to $8 billion or more of proceeds. And I’m just wondering, besides buybacks, are there enough options to deploy that capital? And if not, does that influence how big of a transaction you’d want to do?"

What Eric Choi is hinting at here is that Amplitel was only the entrée. The 'main course', assets currently on the books valued at at least twice that amount are yet to go on the block. I do note these numbers come from an analyst, not Telstra itself. But the head shebangs at Telstra, when addressing the question, made no suggestion that Eric was wide of the mark with his valuation. So where did Eric get his numbers?

I went straight to the Property Plant and Equipment section of AR2022 (p106). There we can find 'communication assets' listed at $19,684m on the balance sheet. Now because Amplitel is a consolidated subsidiary, the full Amplitel assets should be included in that figure (despite the fact that Telstra only owns 51% of them), If, by years end, those Amplitel assets have depreciated down to a value of $5billion, that leaves about $15billion in book value to cover all other communication assets.

We know that 'mobile' is the premier growth area for Telstra. So it is unlikely that the same kind of premium ($800m of book value assets went for $2,800m) will be obtained on these other InfraCo balance sheet items, should Telstra decide to sell. It is also not certain whether Telstra would sell all of InfraCo. They may decide, as an example, that their recently rolled out super fibre highway between main cities (to support third party hyper-datacentres) is best to stay 100% in house. But even considering all of that, and assuming these assets were sold at a 50% premium to book value (verses 200%+ for Amplitel), I think that $7-8billion that Eric is talking about is a conservative figure.

Telstra are being very coy about when, or even if, such a transaction might take place. But my feeling is that such a transaction will very much benefit shareholders and Telstra will 'do the deal'. If the $7-8billion of receipts (I will stick to Eric's value range) is redeployed in a similar way to the Amplitel proceeds, with both a buyback and an interest saved on debt component, then I believe that we could see the eps of Telstra jump by 10-12%. "Money for nothing?" It depends how much of this potential buyback is already built into the share price. And there are analysts out there who think it isn't at all.

SNOOPY