More Bad News For Telstra As T3 Adviser Cuts Its Rating
The Age
Wednesday October 11, 2006
TELSTRA shares slumped for a second consecutive day after the release of the T3 prospectus, as an investment bank involved in the sale advised clients to avoid the company.
Morgan Stanley, part of the T3 institutional sales team, has downgraded its recommendation on Telstra to "underweight" - largely due to threats to the company's fixed-line internet business after the shelving of its $4 billion fibre-to-the-node broadband upgrade.Banks involved in T3 are only allowed to change their Telstra recommendations during the sale period if the change is the result of new information released by the company.Morgan Stanley telecommunications analysts Andrew Hines and Sachin Gupta also lowered their 12-month price target for Telstra by 23? to $3.46 in the research report, stating there were "too many questions unanswered" after the telco's investor briefing on Friday.The analysts questioned how Telstra would deal with the threat of increased use of its unconditioned local loop (ULL), as Telstra's rivals install their own broadband equipment in telephone exchanges.The analysts also said Telstra was putting too much emphasis on its recently launched Next G wireless broadband and telephone network, which operates on the 850 megahertz spectrum."Telstra will be able to claim superior coverage, but in choosing to use a non-global standard spectrum it will suffer from range and cost of devices," the report said."We believe that once the T3 dust has settled, Telstra's relatively high valuation, operating risks and transformation execution risks will result in share price pressure." But Steve Johnson, a telecommunications analyst for The Intelligent Investor, believed potential T3 investors would be better off listening to the briefing presentations from Telstra's top two executives - Sol Trujillo and Greg Winn - instead of just reading the prospectus.Telstra shares fell as much as 7? during trade, but closed 3? lower at $3.71.
© 2006 The Age