Telstra Continues to Struggle

Submitted by Jim Thesiger on 15 February, 2010 - 04:56

Australia’s largest telecommunication carrier Telstra (TLS), continues to struggle as a large number of analysts downgraded its share this week. The downgrading took place at a time when the company is planning to offload fresh block of shares in the market. The $66 billion worth of Future Fund of commonwealth, which holds 10.9 percent ownership of Telstra, will be able to go on with selling its stake from Tuesday next week. It is to be mentioned that the telecommunication giant have used its half-year results in order to reduce the sales guidance for the third time in last six months. This has prompted the downgrading from various market analysts. Most of the analysts went for reducing their 12-month price targets on the shares. Christian Guerra of Goldman Sachs JBWere slashed his forecast to $4.10 from $4.40 where Me Bennett reduced it to $3.20 from $3.35.

Telstra saw its stocks sliding down by 27c or 8 percent after it revealed that the company net profit for six months to December 31 fell by 3.3 percent to $1.85 billion due to a massive decline in the fixed-line phone revenues. In addition to that, the company also struggled to keep up with increased rivalry in the mobile and fixed broadband sector. Some market analysts expressed their doubts regarding Telstra’s capability to forecast after the recent downgrading. David Thodey, the chief executive accepted the fact that the talks with the federal government regarding the participation of Telco in the proposed National Broadband Network had proved a distraction for the higher management.

It is believed that Stephen Conroy, the Communications Minister can force the 50 percent sale of Telstra stake in Foxtel unless the company agrees to move its customer base to the fibre network of NBN. Currently discussion is going on to fix the price despite it seems more time is required to strike an agreement. The fall in the Telstra share price in last two days has washed out as much as $3.3 billion off the value of its stocks which are mainly held in Australia. The company reduced the value of the remaining 1.35 billion shares of the Future Fund by as much as $360 million.