Forum Archive Index - May 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi winner69,

You say Telecom is not a growth company?  Well there is another side 
to growth and that is cutting costs.  Looks as though Ms Gattung is 
doing her bit by keeping the 'bonus' side of her salary payment down 
;-).   Seriously though, what are all those mobile phone selling 
centres doing around the shopping malls?   Wasn't one of Telecom's 
first publicly visible restructuring moves to close/sell off all 
their phone shops?  So why are they back in this shop retail 
business?   Competitive pressure to match Vodaphone?  Maybe they will 
be able to phase back this retail presence in the future.

I guess the immediate growth prospects must rest on CDMA and its 
acceptance in the mobile market.  Do any sharechatters out there own 
a CDMA phone?  If so what persuaded you to upgrade and how do you see 
the benefits now you have got one?  Do you find that you are spending 
more money on your mobile now you are on 027?   I realise any 
responses to this will be totally unscientific in survey terms.   But 
perhaps some of the more technically advanced sharechatters might 
help the later adopters understand if/why CDMA really is a growth 
path of the future?

Winner, you say that cash flows are reducing but profits are static.  
In a tough market perhaps this is showing new discipline - not 
chasing business at any cost!  Perhaps a good sign?  Please keep us 
informed on any reply you get from Marco on your cash flow concerns!

The level of TEL debt must be of concern, if only because it limits 
Telecom's options for new initiatives!  Writing off a couple of 
billion of TEL's investment in AAPT won't change their cash position 
but what will the banks think?   Will they demand that Telecom raise 
more capital?   Perhaps there is some negotiation going on behind the 
scenes which is why nothing on the future valuations of AAPT in 
the books was announced last Friday?.  

Earnings per share are declining because of the share placement made 
earlier in the year.  I'm not concerned from a company viewpoint 
(earnings aren't declining), but I am from a shareholder viewpoint.  
If TEL make another placement of shares, how much will my share in 
the company be diluted?  I keep thinking they will have to announce a 
cash issue, but with Bell Atlantic Holdings (USA) on the books and 
wanting to get out, there is no guarantee that such an issue would be 
well supported.  So I think we are looking at more share placements, 
but at what price?   Certainly those institutions that subscribed to 
the last lot at around $5.50 must be smarting!   I can't see Telecom 
placing any more shares within the next two years at more than $5, 
and even that will require the share price to climb on the market to 
$5.50 or so!   Like you Winner, I see Telecom the price of TEL shares 
range bound, trading in a share price band of $4.20 to around $5.50 
for the next several years.  I also see those dividends will keep 
rolling in.  It would alienate too many investors if they cut them 
further!

In summary, and with hindsight I think we can say that Telecom's much 
touted growth strategy in Australia has failed.  Being a shareholder 
this admission gives me no pleasure, but we can only look forwards, 
not backwards.  The result of the failed strategy is that TEL has 
very high debt.   Given this ,the debt repayment profile looks sound 
- no big lumps to be repayed within the next five years - and they 
amount they are paying on their money seems to be resonable (between 
8 and 9%) given their risk profile.  How they were able to get away 
with issuing convertible notes in May 2001 at only 5.4% I do not 
know.   Perhaps the person in finance who organized that deserves a 
promotion!  

SNOOPY



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