Telstra Corporation (TLS) Update

Submitted by Jim Thesiger on 28 May, 2008 - 16:29

Telstra Corporation (TLS) has a target price of $4.90 and an Outperform recommendation from Australian Stockmarket analyst Macquarie Research Equities.

Telstra Corporation (TLS): Do You Own a Mobile Phone?

The mobile phone market at the moment is growing strongly, with subscriber numbers increasing nationally. This large increase is driving higher margins across the industry, recently reinforced by strong Vodafone subscriber and Average Revenue Per User (ARPU) data. According to Macquarie Research Equities (MRE), Australia’s largest Telco is well positioned to compete in the growing wireless broadband market. MRE maintain their Outperform recommendation on TLS.

Event

  • Vodafone Australia released their subscriber and ARPU data as part of their March Quarterly earnings.

Benefits for TLS

  • Sub Growth Driven by Wireless Broadband: MRE deliberate that wireless broadband continues to drive subscriber growth. And whilst there is a direct flow through of higher margins these are offset, to a degree, by higher capex requirements as operators invest in further infrastructure.
  • Reaffirming the Telstra Mobile Growth Story: The report released by Vodafone underpins the strong fundamentals of the mobile industry at the moment. MRE state that TLS is well positioned to compete in this market given their established national coverage via their Next-G network and a scaleable backhaul network
  • High-End Dominance: MRE also proclaim that TLS continues to dominate “the high value end of the corporate and consumer markets”. As a result the company can leverage of economies of scale and maintain their market share.

Recommendation

MRE retain their Outperform recommendation on the stock with a 12-month price target of $4.90. The catalyst for this target remains cost driven earnings upgrades for FY09/10 over the next 6 months. MQ Structures Products offer a diverse range of warrants over TLS, so please call our Sales Support Team on 1800 803 010 for any questions.

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