Telstra shares have factored in PCCW JVs valuations
2001-07-12
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- analysts
Telstra PCCW hold
By Alan Wood
SYDNEY, July 10 AAP - Telstra Corp Ltd's share price has already
factored in lower valuations on joint ventures between Telstra and
Asian partner Pacific Century CyberWorks Ltd (PCCW), according to
analysts.
Telstra has yet to update its valuations to the market and will
not say whether a planned briefing on the joint ventures will be
held before or after the company releases its full year result on
August 29.
An analyst who did not wish to be named said the recent lowering
of market valuations on the Telstra-PCCW joint ventures was an
accounting issue and the lower values had already been built into
Telstra shares.
"It's big in dollar terms but I don't think it is a big issue
for the market, because the market is already valuing them at what
they regard is fair value rather than book value," the analyst
said.
He said he had been valuating Telstra's joint ventures with PCCW
"well below book value".
Telstra's carrying value in the Reach joint venture was a bit
over $5.1 billion, he said, adding he ascribed a carrying value
around $2.6 billion, leaving a shortfall of around $2.5 billion
The analyst said Telstra's cash investment in the Regional
Wireless Co was around $3.1 billion.
"But we believe the value of that is closer to $850 million, so
we think the shortfall is around $2.3 billion."
Credit Suisse First Boston analyst Guy Hallwright said at this
stage Telstra had not stated any value for the joint ventures in
company accounts.
Mr Hallwright noted that when Telstra announced it had completed
the establishment of the joint ventures on February 7, it said it
had acquired the 60 per cent of Regional Wireless for $US1.68
billion (around $A3.05 billion).
He said it was unlikely the Regional Wireless mobile joint
venture in Hong Kong would be written down by Telstra.
Mr Hallwright said regarding the Reach joint venture, both
parties put in a relatively low amount of actual assets.
"So nobody paid anything in dollar terms... they were going to
put that whole enterprise before debt on the books at $US6.5
billion," he said.
"We now think they will put it on the books at less than that."
Mr Hallwright said the Asian joint ventures were worth about 35
cents of Telstra's total share price.
A Telstra spokesman said the company was working towards holding
an industry-wide briefing on the joint ventures, and financial data
on valuations would be presented at that briefing.
Telstra has downplayed the likelihood of any flow-on from
negatives about PCCW to the pair's joint ventures, but an analyst
report said Telstra's share price would be impacted by negative
items including last week's report of a $US1.9 billion loss by PCCW
in United States accounting terms.
The ventures include Regional Wireless Co, an Asian mobile
venture that is 60 per cent owned by Telstra and 40 per cent owned
by PCCW. It houses the mobile assets of Hong Kong Telecom.
They also include the 50:50 broadband infrastructure or internet
protocol backbone provider Reach Ltd and a 50:50 internet data
centres business.
Telstra shares today closed one cent better at $5.31. On Monday
they traded to a new three-year intra-day low of $4.96.
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