Got Your Telstra T3 Prospectus? Now Decide...

Submitted by Marco on 26 October, 2006 - 16:21

Telstra T3 Propectus

So you've got your Telstra T3 Prospectus? You've got until 4pm Thursday 9th November to decide - that is if the offer isn't closed early. There are people against buying Telstra again - especially those who were hurt from T2 and those who are keen to buy. So how do you decide whether or not to subscribe to the Telstra 3 float?

There are three things the Telstra (TLS) share price can do: continue to slump and slide, trade sideways or it can recover as a result of Sol Trujillo's 23 billion five year transformational plan actually working. Finance Minister Nick Minchin was quoted as saying that the Government had already presold $4 billion, or half of the $8 billion worth of shares on offer to retail brokers and financial planners. Macquarie Equities private client adviser David Halliday said that "The X factor is what mums and dads will do." "[But] it's becoming apparent that the Government and its advisers have done enough … at least for the sophisticated market to take it seriously." Brokers believe that the final price for the two instalments will total more than $3 a share, although this will not be known until after institutional investors bid in a so-called book-build over three days from November 15. It has also been reported that the demand from Japanese investors for T3 shares has fallen short of expectations. Japanese retail investors have been granted at least 120 million shares - worth about $435 million, through a Public Offering Without Listing (POWL)

In the short term, if you are looking for a place to park your money, perhaps the Telstra T3 prospectus may have something to offer. Keep in mind that Telstra investors will get a yield of 14 percent on the initial $2 instalment. But is this a "safe" and worthwhile return compared to what you would receive by keeping your money in an interest bearing account?

In the longer term, you may want to look closely at the Telstra 3 (T3) Prospectus document closely. Remember there are seven pages of risks listed in the prospectus. The risks in a nutshell are the regulator (which is hampering the one attractive quality Telstra had - monopoly characteristics), the Australian government (who continue to undermine management) and the other threats and risks associated with the new technology being implemented into the telecommunications giant. Another aspect to consider in the longer term is your yield. The 28 cent dividend boost is only for the first year, who knows what it would be the year after. Also, the company is borrowing money to be able to pay out those dividends.

The Telstra 3 (T3) offer can be attractive to those looking to park their money in the short term or for those who really believe that Telstra can be transformed in the longer term albeit the risks that are listed. You can get a PDF version of the Telstra T3 prospectus from the offer website.