Australian Telecom Sector Dialogue

Submitted by Craig Strzelecki on 30 April, 2007 - 19:01

Share market analyst UBS has provided some dialogue to the Australian telecom sector.The analyst has reported an underperformance in TLS and TEL shares.TLS underperformed by 4% and has now given up all outperformance (peaking at c9%) since the ALP announced Fibre plans on 22 Mar. TLS outperformance since T3 (9-Oct) is now 2%. TEL underperformed by 1%. SGT performed in-line despite strong performance by PT Telkom (+3%) as M&A talks subdued potential cap management. TEL submits separation plan, SGT eyes Vietnam: TLS reveals $1.5bn Next IP network and resigns NAB ($600m). PWT shareholders vote in favour of TEL’s $357m bid. TEL submits structural separation plan stating MED's plan is unworkable and will result in broadband under investment. SGT confirms interest in Vietnam, Central Asia and the Middle East. Bharti's Q407 results marginally disappoint. Catalysts to Australian telecommunications sector: broadband politics, upcoming results, capital management: TEL: capital mgt, UMTS build, 3rd Mobile entrant, structural/operational separation, H3GA recap; Voda aggression and Q307 results (3 May). SGT: FY07 results/FY08 guidance (May 9), capital mgt, regional M&A (Mobifone bid?) renewed Optus aggression? TLS: Fibre regulation. Here are the company preferences of the analyst: SGT over TLS, TLS over TEL: SGT is their top pick. The 25% Bharti price target upgrade (or c25c) has yet to be factored in. TLS premium appears sustainable but hinges on broadband politics. TEL trades at a premium but aggressive PWT synergies ($100mpa) & YPG cap mgt gains would imply it is fairly valued. A previous Telecom sector update.