The outlook for Telstra not as bad as feared by the market

Recent full-year results saw an increase in the net profits for the Australian incumbent telecommunications provider, Telstra, which has led to a number of analysts recommending the buying of its shares.

Many industry analysts have advised that the fears from the market over the future of Telstra are not as bad as they think, even in light of the difficult decisions faced by David Thodey, the new boss of the Telstra Corp., as he enters into negotiation over plans for National Broadband Network with the Federal Government.

The impending annual report is expected to improve the state of Telstra’s shares, which is why many analysts are recommending buying them.

When the report is released on 13th August analysts expect to see the groups net profits increase by about 3 percent with figures of $3.816billion.

As long as things work out for Thodey in his negotiations the operator could either profit from the telecommunications revolution brought about by the government or at worst not lose anything said analysts.

When reiterating to high rating given in a note on 20th July the Morgan Stanley analysts said “While tighter regulation and the replacement or upgrade of Telstra’s copper network (through the construction of the new network) will no doubt affect Telstra’s long-term earnings, we think that the extent of the decline discounted into the current share price is unrealistic.”

Large sections of the Telstra network are expected to be rendered useless by the planned $43 billion fibre-to-the-home broadband network that was outlined earlier in the year by the Prime Minister, Kevin Rudd.

Compared to many of the other developed nations around the world Australia is currently behind in broadband connection speeds, and in order to reduce costs Canberra is looking at Telstra to provide infrastructure and fixed-line network access for the new National Broadband Network.

Source – Total Tele