Telstra (TLS) Update

Telstra (TLS) shares have fallen lower today after the government announced yesterday that it will conduct a competitive bids process to enable the build of a high-speed broadband network. An expert panel has been appointed to prepare guidelines for the bid process (including setting a timetable for the process) and also to conduct public consultation. The panel will not choose who builds the network, but can clearly influence the process with its findings. The government will control the final outcome. Timing remains unclear: The announcement was not conclusive on the critical issue of timing surrounding an FTTN build, simply stating that the expert taskforce will “settle a realistic timetable for the bids to be submitted and assessed”. The taskforce’s conclusion on timing could be anywhere between two months and a year, with a shorter timeframe favouring Telstra, and a longer timeframe suggesting a broader review of industry structure ahead of any decision. Given Telstra (TLS) is the natural builder of this network due to its existing infrastructure, delays to this process are likely to indicate dissatisfaction with the panel on pricing and access issues in Telstra's submission. A post-election result also introduces the risk to Telstra from Labour's broadband policy, which is effectively a form of network separation. A decision before the election is still possible, but unlikely: Given legislative change is required before any of the existing bids would be viable, a pre-election resolution on this issue will be difficult to achieve. Legislation would have to be passed during the two parliamentary sitting weeks in September (beginning 10 Sept and 17 Sept). However, to allow due process, a decision on the successful tender would probably have to be tabled during the August sitting weeks (beginning 7 Aug and 13 Aug). This would give the government and expert panel just under two months to accept tenders, announce a successful tender and draft the appropriate legislation. Ongoing uncertainty has been a positive for all players: A lack of clarity on timing around an FTTN rollout has been a positive for all industry players. Network operators are reluctant to drive down pricing on existing fixed line products given the uncertain service life for some infrastructure investments such as DSLAM equipment. This has delivered a very stable environment for pricing outcomes on fixed line services over the past six months (evidenced by increasing broadband ARPUs), that is likely to continue throughout the rest of the calendar year. No change. The introduction of an expert taskforce to assist in this process has been flagged in the media for a number of weeks. The critical data point will be any indication of timing around the process. Broadly speaking, the longer the process takes, the greater the risks to Telstra.

Telstra Corporation Limited is listed on the Australian Stock Exchange (ASX) under stock code TLS. You can view their investor website here. TLS was listed on the ASX on 17 November, 1997. Donald McGauchie is the chairman of Telstra and the managing director/CEO is Solomon Trujillo. The company is a telecommunications Carrier and provides telecommunications and information services, including mobiles, internet, and pay television. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade TLS. Check your charts and good luck with your share trading!