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Can't see the major shareholder being able to sell in the medium term. Their position looks a lot stronger after last week so expect further growth in the near future, perhaps topping out about $5.20 this quarter.

 

jarm

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Hey Jarm, the news that TLS is leapfrogging into partnership with Hutchison is both encouraging and concerning.

 

Firstly it is a step in the write direction. Australia is seriously lacking in IT development, and if this increases the consumer uptake than this will be a postive thing. But then TLS partnerships to date can rarely be described as succesful, the debarcle in pay TV being a case in point in Australia, and it's HK venture being an example overseas.

 

It is concerning because part of the problem with Pay TV has been Telstra's refusal of compeditors to use it's service, to ensure it's monoploistic profits and forcing them to go out and duplicate their network. Could their involvment in Hutchison herald a similar lack of co-oporation necessary if many of the serives that you describe 3G having to offer are frustrated or impeded because of TLS buisness approach?

 

To my mind a further example of the failures in TLS delivering a quality service to all of Australia also occured last week, when they spoke of it taking 10-15 years to replace it's copper wire and get most of Australia connected to optic fiber.

 

But then it is hardly a suprising view given that there are people in Aust Government who still consider the provision of a phone service to a house as a luxury. This is the mentality that TLS really has to turn around if it is to really succeed.

 

Ten or fifteen years is just too long to wait in order to get Australia connected or to provide these sort of services, when they are plainly in demand.

 

When you see the excess bandwidth and tiny margins that Telcos in Europe are earning, it won't be long before money starts to look for where there are fat, lazy Telco companies lazing around in the world, and shoot in to steal the creamier share of the market. This is the threat to TLS long term market share.

 

Ontop of this there is the high technology risk, which I mentioned in an earlier post.

 

To my mind none of this is going to happen overnight. For the time being TLS will continue to be able to pay a nice fat dividened, but it's far from clear as to what it's long term future is gunna be.

 

Cheers Disco

 

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I agree with you Disco that TLS management culture has been less than encouraging of late. I suppose you can blame old-style Telecom ideas lingering in TLS but the personnel have largely changed while attitudes have not.

 

The new technology we have been discussing is a threat to some of the revenues without doubt. But as others have pointed out, there are so many changes on the horizon that will continue to earn TLS large margins in the mediun term that I now believe the next 5 years are reasonably secure. Hutchison in contrast is likely to be subsumed in effect after themselves overspending (or at least overcommitting themselves) in 3G. Like TLS's sorties into new markets, they gambled and lost. So TLS will pick up a Kerry Packer style Channel 9 windfall from Alan Bond.

 

Regarding the 10-15 year changeover to optic fibre, this is the basic reason why the Nationals and ALP will not allow the T3 to proceed. The services outside the metropolitan areas are sadly lacking. Even ADSL is unavailable in sizeable country centres. So much is now dependent on internet access (even banking in the country) that a lazy $3-4B neads to be allocated to rectify the situation. I can't see a privatised TLS spending any of that so it will take Govt backing as an essential service. I know we have a tyranny of distance but competitors don't take prisoners and certainly don't listen to excuses.

 

Meanwhile I have decided to keep all my TLS shares.

 

jarm

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Perhaps these figures will grow in the country areas as well.

 

jarm

 

Landlines cut off as rental costs rise

By Daniel Dasey, Consumer Reporter

August 8, 2004

The Sun-Herald

 

One in five Australian households would save money if they gave up their landline and made all their calls on a mobile, new research shows.

 

And with phone companies now introducing radical plans that make mobile calls cheaper than home phone calls, more than one in seven consumers are considering relying exclusively on their mobile handsets.

 

Respected phone plan analysis website PhoneChoice surveyed more than 1000 consumers about their phone-use intentions following moves by Telstra in April to significantly increase home phone charges.

 

Rental fees for household phones rose by as much as $3.45 a month and the cost of a telephone call rose 2c. It was the fifth time Telstra had raised line rentals in the past four years.

 

PhoneChoice found that a record number of consumers - 14 per cent - were now considering disconnecting their landline, up from 6 per cent in December 2003.

 

The planned desertions were on top of about 5 per cent of consumers who have already given up their landlines.

 

PhoneChoice spokesman Reg Robertson said the trend was driven by the higher cost of Telstra services and new products by mobile providers.

 

He said some phone companies had tried to capitalise on dissatisfaction with rising Telstra charges by introducing "capped call plans".

 

Under this arrangement, consumers can buy a "bundle" of calls at a discounted rate. For example, a $79 bundle on the market includes $500 worth of calls.

 

Calls above the $500 cap are charged at conventional mobile rates.

 

Mr Robertson said some capped plans had drawbacks, including extra charges for text and data services.

 

Vodafone has introduced three varieties of bundled calls to cope with the growing demand from consumers, and several other companies are expected to announce plans this week.

 

Mr Robertson said ditching landlines was unlikely to affect consumers who wanted to use the internet at home.

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For long term investors (5 years+) TLS is an absolute gem to have as part of any portfolio. Strong cash flow, good dividends, and in a strong position for the foreseeable future, due to the govt wanting to protect their investment.

 

Not to mention my previous reasons for long term buying (i.e. payments by phone)

 

With telecoms becoming more and more of everyones daily life, regardless of the economy, it is also defensive in nature.

 

 

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From InvestorWeb

 

jarm

 

This week, Telstra Corporation (TLS) announced a record net profit of $4.12 billion for the year ended June 30, up 20.1% from the previous year. Sales increased by 1.2% to $20.74 billion while total revenue fell 1.7% to $21.34 billion. Earnings per share were 32.4c, a rise from 26.6c. A fully franked final dividend of 13c was declared, up from 12c, bringing the total payout for the year to 26c, down from 27c last year (which included a 3c interim special dividend). The directors stated the net profit reflected the company's continued focus on margins whereas sales were increased by growth across mobiles, Internet and IP solutions, PSTN products, advertising and directories.

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From Alan Kohler on new wireless network competition for TLS.

 

jarm

 

Telstra loses its licence to print money

By Alan Kohler

August 17, 2004

 

Telstra's share price has been sagging like an elderly dieter's jowls since last week's record profit. Why? Because its best is behind it: last week's may have been the last profit increase Telstra ever reports.

 

Most of the analyst commentary has focused on Telstra's poor effort as a cost dieter, which was, indeed, a bit like having salad for lunch and a pie and sauce for afternoon tea: every dollar cut from costs was matched by $1.80 in new costs somewhere else.

 

In general, CEO Ziggy Switkowski has made an impossible promise: to increase sales and cut costs at the same time. Telstra cannot do both, but he has unwisely staked his job on pulling it off (and the least said about this the better).

 

Costs are not the real problem with Telstra; the real problem is that it has lost its monopoly.

 

Telstra's has always been the best sort of monopoly to have. It's the sort based on capital barriers to entry, like railways and electricity, rather than political patronage, like casinos. Government licences run out eventually, even for licensees named Packer, but the need for prohibitive amounts of money and real estate to build access networks - whether roads, railway lines or wires - goes on forever.

 

When the T2 float was priced at $7.40 in October 1999, the national customer access network looked a unique, irreplaceable monopoly asset. Now it turns out you don't need wires to provide all telecommunications - air will do nicely.

 

Telstra's "natural monopoly" of owning the wires is evaporating into thin air because there are about to be several overlapping "local loop" networks - sometimes called 4G - connecting every home through wireless spectrum.

 

There are already two wireless broadband networks covering virtually all of Sydney: Peter Shore's and David Spence's unwired network, and Jim Cooney's Personal Broadband Australia.

 

Unwired's network will be officially launched this Thursday by the communications minister, Helen Coonan. It cost $33 million and took six months to build. Of that cost, $4.5 million was for back office stuff that won't have to be duplicated when networks are built in other capital cities.

 

Unwired covers 90 to 95 per cent of all homes and flats, and the spaces in between, from Bondi to the Blue Mountains. Modems are now on sale in Harvey Norman stores for $189. The monthly access charge is $34.95, which includes 200 megabytes of data, after which the speed slows from 512mbps to 64mbps (there is no extra cost).

 

Telstra's cheapest ADSL plan is $29.95 a month for 200 MB and 15c per MB after that. But it's fixed. Unwired is fully mobile, so you can use it in the local park and when you move house, it comes too.

 

In December David Spence is planning to launch "voice over IP" (that is, phone calls) over his network using a $50 box that goes between the modem and the ordinary telephone handset.

 

But there are already a few broadband voice-over-IP services around, such as Mobile Innovations, run by Ilkka Tales out of Sydney's French's Forest.

 

Tales has had a commercial pilot running for a few months and plans to officially launch next week. The price is from $19.95 a month, with 10c each for untimed local and long distance calls, 5c a minute for international, and free calls to others on the network.

 

Businesses like Tales's are sprouting like daffodils in spring. The main selling point is cheap untimed calls and free calls to others on the same network, so families and friendship/business groups are encouraged to sign each other up.

 

Personal Broadband Australia, 54 per cent owned by mobile phone network expert Jim Cooney, has almost finished its Sydney wireless network and is planning to roll out in Melbourne, Brisbane and Canberra next month. Adelaide, Perth, Darwin and Hobart will follow soon afterwards. Total capex budget is $350 million.

 

PBA is a wholesaler and its prices, through a range of resellers, are dearer than Unwired's. Also the business plan is more about mobile laptop access for professionals than desktop computers in homes. The card for the laptop costs up to $500 and the cheapest access is about $99 a month. Cooney says he has no plans at this stage for voice calls.

 

Meanwhile last week in Perth Western Power announced that its experiment in using power cable trenches to provide cheap fibre access to Perth homes was a failure and its subsidiary, Bright Telecommunications, would be closed.

 

Bright seems to have been a total stuff-up: the company spent $23 million to get optic fibre cable past only 1000 homes. That's $23,000 per home which would give a business plan investment payback of about 100 years. God knows what they spent the money on.

 

That doesn't mean fibre to the home, which Telstra is now piloting in Queensland, will be a dud, but it is being rapidly overtaken by nuisances like David Spence and Jim Cooney.

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It appears the consensus view is that the next year will be tight regardless of a good bottom line. May not see $5 again for a little while yet unless the buy back has a disproportionate effect, which I doubt.

 

jarm

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