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Has Goldman Sachs ever used a typical landline or mobile phone through telstra???


The last 12-18 months their performance and service continues (yeah, I know, continues) to decline. How can you not feel pity for anyone who utters the words "i'm off to the telstra shop to sort out my account".


From my perspective the telco market in Australia is stuffed from privatisation, a lack of competition, and gutless regulators. Kinda like all our infrastructure.


Yes I hold Telstra, but I can't see me diving in for more anytime soon.

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Telstra urged to sell long-term NBN contract


Scott Murdoch10:58AM June 21, 2017


Telstra is being urged to find a buyer for its long-term NBN revenue stream to reduce debt and carry out a major share buyback to reward its investors.


JPMorgan and Macquarie are understood to be working with the telco on the future options of its long-term NBN contract.


The Australian government reached an agreement with Telstra in 2011, where it would receive $11 billion in compensation for the use of its copper network, $4bn of which related to payments for disconnecting customers from its phone network and migrating them to the NBN.


Within the payment was about $5bn of infrastructure access payments over the long term, which is understood to be the revenue for which Telstra has banks examining options.


Shaw and Partners analyst David Spotswood has today raised the prospect that TelstraÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s $1 billion in long-term regular NBN lease payments could be worth about $15.3 billion. The payments are due to be delivered until 2045.


ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“There seems to be a view in the market that Telstra will sell its. long term lease revenue,ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ Mr Spotswood said in a research note.


ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“This does not change the valuation or earnings profile of Telstra in the long term but will reduce its short-term valuation ratios.


ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“This simply brings forward earnings to the present, like government selling assets to fix a short-term budget hole but losing the long-term revenue.ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ


The research said if Telstra was to earn $15 billion it could use $5 billion to pay down debt and $10 billion on a mega share buyback.


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Jul 13 2017Q


Increasing competition is expected to squeeze Telstra's margins. Peter Braig


Telstra investors are bracing for a cut to the company's popular dividend, as the telecommunications giant faces growing pressure from competitors and a looming earnings drop due to the NBN rollout.


Fund managers and analysts believe the telco will cut its dividend when it reports full-year earnings next month. It is also expected to announce the outcome of its capital allocation review.


Citi analyst David Kaynes believes Telstra will trim its dividend to 25ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ in the next financial year, down from 31ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ this year. However, he believes Telstra should take more drastic action and slash its dividend to 17ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢.


"This is what we believe Telstra should do. By cutting the dividend immediately to the forecast low-point in earnings per share, and redirecting excess funds to buybacks, this will put EPS on a higher trajectory in the long-term," Mr Kaynes said.


UBS has previously warned Telstra's dividend could come under threat.


Contango Asset Management managing director George Boubouras said a cut to Telstra's dividend should come as no surprise to investors and has been priced into the telco's share price, which has slumped 15 per cent so far in 2017.


"Cutting to the chase, it's all about what is the most appropriate capital management strategy going forward and any capital review would have to suggest going forward the dividend can't be maintained the way it already is," Mr Boubouras said.


"Mum and dad investors and self-managed super funds would be disappointed. But, from our point of view, it's been priced in this year. You can't be having dividend yields around 7 per cent. It's a very high DPS versus their peers offshore. You need to put it into perspective. Yield-hungry investors need to put some context around it."


Telstra declined to comment ahead of its full year earnings announcement in August.


Citi is forecasting Telstra's EBITDA to fall from about $10 billion in the 2016 financial year to just below $8 billion by the end of the 2022 financial year, due in large part to the NBN.


The investment bank reckons NBN access charges will cost Telstra $2.7 billion and growing competition in mobile will squeeze margins and average revenue per user by about $800 million by 2022.


Mr Kaynes said productivity improvement and cost savings should help Telstra claw back $1 billion and ongoing NBN payments will add another $500 million.


"Telstra's core EBITDA is already in decline and, while the NBN impact to date has been modest, this will accelerate over the next three years. Reported EBITDA will continue to rise until the one-off NBN compensation payments peak in [2018-19]," Mr Kaynes said.


Clime Asset Management large cap portfolio manager David Walker said Telstra's payout ratio is too high and he thinks it will cut its dividend within three years at the latest, but probably sooner.


"Telstra is going to lose its traditional high-margin ADSL earnings. It's going to become an NBN reseller like everyone else," Mr Walker said.


While consumer broadband prices continue to fall, the cost to internet services providers on the NBN is much higher than on ADSL.


Telstra was forced to sell its copper network to the government for $11 billion, the payments of which it receives progressively over time.


"The NBN payments peak in 2018-2019. But the loss of the traditional high-margin businesses are forever. You've got all these pressures on core earnings and the payout ratio is already 90 per cent of those earnings," Mr Walker said.


He said Telstra is facing growing competition from Optus, which has improved its network dramatically, and David Teoh's TPG Telecom is preparing to become Australia's fourth mobile provider and undercut rivals.


Mr Walker said this would put pressure on Telstra's average revenue per user, with data inclusions becoming more generous, but the telco also needs to be careful it doesn't add too much traffic to its network, which would increase the need for additional capital expenditure to lift capacity.


"We're bearish and we wouldn't look at it until it was below $4," Mr Walker said.


Citi noted Telstra's mobile EBITDA has jumped 70 per cent in the five years between 2011 and 2016 to $4.4 billion ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ subscriber growth and rising margins have been the main reasons.


There has been speculation Telstra might securitise its NBN payments, having broached the subject at an investor day last year.


JPMorgan analysts told clients that Telstra could raise $13 billion to $18 billion if it securitised its 30-year NBN payments, and use the proceeds to buy back shares and protect its dividend yield.


"However, the bigger issue is whether the securitisation could be deconsolidated and left off the balance sheet," JPMorgan analysts told clients.


"Off-balance sheet would be more accretive than on, as the latter would equate to taking out straight debt. We expect Telstra would only go ahead with the securitisation if it's deconsolidated, at least in the view of the credit agencies."


However, Mr Kaynes doesn't think management will go with securitisation.


"While we don't believe that management has ever said they would securitise the long-term NBN payments, there is now an increasing expectation in the financial markets that Telstra will announce some sort of transaction that will bring forward the long-term NBN payments," he said.


Mr Kaynes reckons securitisation would need to be consolidated on Telstra's balance sheet.


"In this case, it would simply be an interest rate arbitrage, where Telstra seeks to raise funds at a lower rate than it otherwise could, with the funds then deployed to repay more expensive debt. While this would still be worthwhile, given Telstra's already low [about 4 per cent] cost of debt, the real benefits would be small."

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Why Goldman Sachs Prefers Telstra Over Spark

By Robert Guy July 11, 2017 11:40 p.m. ET


Goldman Sachs has run its eye over Telstra (TLS.AU) and Spark New Zealand (SPK.NZ) and decided the Australia telco is a better investment than its kiwi cousin.


The brokerage, which upgraded Telstra to buy in June, likes the telco's AUD1 billion productivity program, a path that Spark is also treading given the plans for cost cutting and margin expansion outlined at its recent investor day.


Spark is targeting an EBITDA margin in the low 30% range (compared to 26.3% in the first half) based on cost savings, which Goldman Sachs reckons would need the kiwi telco to lower its fixed costs by around 4% across 2018-2020 for a total decline of 11%.


Labor productivity is another area where both telcos are looking to save money, with Spark believing the use of technology could help cut the number of staff. Telstra is also cutting jobs:


Telstra faces a similar opportunity to Spark, given its staff cost/revenue is the highest in ANZ (TLS at 19% in 1H17 vs. 11% average). Recent signs are supportive, with Telstra announcing a 4% reduction in its workforce over the next 6 months ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ which we estimate to be annual savings of A$160mn.


So why is Telstra, rated a buy, a better investment than Spark, which is rated neutral? It all comes down to valuation and yield:


We continue to believe that TelstraÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s A$1bn productivity target looks somewhat conservative, with this opportunity not fully reflected in its current price. With Telstra trading on an FY19 EV/EBITDA of 6.1X and fully franked dividend yield of 6.4% vs. Spark at 7.5X and 6.0% respectively, we reiterate our preference for Telstra (Buy) over Spark (Neutral).


Goldman Sachs has a price target of AUD5 a share for Telstra (which last traded at AUD4.32 a share) and NZD3.60 a share target for Spark (which last traded at NZD3.84 a share).

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Does Telstra really go out of its way to piss off customers??

I went online last week to upgrade the credit card details on my Telstra direct debit auto payment.

Got a snail mail letter this morning saying they could not activate it as some details were missing.

Told me to ring a number , which I did and got an automated response to say " This promotion has concluded".

Incompetent D!ickheads.




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Yes ..... and as it has sold off, it has moved through their Trigger level at $4.32 to be "re-rated" at Accumulate



3 recent bits of Morningstar "analysis"

08 May - Accumulate at 4.40 : ACCC Declares No Mobile War but Battles Still Ahead for Telstra

19 April - Accumulate at 4.00 : Roaming and Groaning About Another Risk for Telstra

13 April - Accumulate at 4.17 : NBN on the Fixed Side, Now TPG on the Mobile Side; Cutting Telstra FVE to AUD 4.80


So, basically, that - forward looking (?)(!) - house view has probably remained constant since 16 Feb results (when it dropped from 5.20 to sub $5.00). Last "Investment Perspective" was 13 April

Perhaps the other label AVOID would be more appropriate (I try to pay no attention to this sort of rear-view stuff)

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