Forum Archive Index - October 2000

["Peter Maiden" <pmaiden@today.com.au>]

TEL and other telco related companies - welcome to the new world. 
The new valuation of these shares will evolve over the next month or so. But 
they won't be as high as they once where. The value of these companies that the 
market gives them will reflect what they can actually earn over time.

Typical of what is happening (and the dimensions) to telcos in the USA and the 
rest of the world is covered in this article from Business Week.

http://www.businessweek.com/2000/00_39/b3700132.htm

TEL is in the same boat. TEL revenue growth over the past few years (2-3% last 
year) has been subdued, their earnings are falling,  they are spending a lot 
more on capital so they stay in the game($1B this year in NZ alone) and have a 
plummeting share price.

Wherever the share price bottoms out at I think that will be the level it will 
stay at for some time. In the short to medium term I don't think that the price 
will go up to anywhere near the heights it has achieved in the past. Telcos are 
now in a different game  and the market will value it as such. These types of 
companies will need to demonstrate over the next year or so that they can 
generate the necessary earnings to cover the cost of such high levels of capital
spend - in a highly competitive market driven by consumers who will want value 
from from their telecommunications/wireless supplier.

However there does remain some speculative pressures that could boost the TEL 
share price in the short term.

1) acquisition or alliance by/with another telco - but won't this be at a 
premium to only the current value

2) floating Xtra and Southern Cross Cable. Seen the recent TV ads about the 
cable? Interesting timing?

One good thing the weighting of TEL in the NZSE 40 will reduce.

Peter

Disc - no TEL


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