Telstra regains some ground after week _2 Sydney
2001-06-24
Telstra Week 2 Sydney
Mr Cain said it would take a while for Telstra to regain the
market's confidence, particularly in regard to the downgrade.
"Our view is that the downgrade was due to a combination of
historic factors," he said.
"Given that telecommunications is such an essential service and
people have witnessed either directly and indirectly through the
collapse of One.Tel how it doesn't pay to be caught up with a cut
price operator, a flight to quality just reinforces Telstra's
dominance."
Analysts have also been eyeing Telstra's joint ventures with
Asian partner Pacific Century CyberWorks (PCCW), which will be
included in the group's accounts for the first time at balance
date.
One analyst said one of the joint ventures, Reach Ltd, has been
set "at the value that Telstra originally said it was going to put
that in its books at, which was $US6.5 billion... we've just taken
a more conservative view of that," he said.
Mr Cain said there is a slight chance of insolvency for PCCW
given the high level of indebtedness within PCCW.
"But when it comes to Telstra it is our understanding in
relationship to the joint ventures, Telstra has structured its
involvement so that it is effectively quarantined from active
insolvency of PCCW," he said.
Earlier this week reports in the South China Morning Post said
that Reach Ltd, is seeking to raise $US500 million-$US1 billion in
debt.
One analyst said Telstra will be watched by the market in
respect of the upcoming federal election, and whether there will be
a further government sell-down of the stock, and what position the
eventual election winner will take on a further sale of shares to
the public.
"I think ultimately, irrespective of which party is in... 100
per cent of Telstra will become in the public domain," he said.
He said when this happens Telstra will become a better
performer.
"(But at the moment) there is a dead hand of government on
Telstra, and until such time that dead hand is removed that will
constrain Telstra," he said.
Analysts and brokers said Telstra has this week also been hit by
end of year "tax loss selling", in which investors were taking
advantage of share price weakness to help write off tax losses.
Investors could buy back Telstra at a later date after realising
the loss on the shares to offset other share profits.
Telstra closed 19 cents stronger at $5.61.
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