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Daily ShareChat: Telecom

By Jenny Ruth

Thursday 2nd June 2011

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 Jenny Ruth

At last common sense has prevailed and Telecom's network business Chorus will partner the government in rolling out New Zealand's ultra fast broadband (UFB) network, says Michael Wu, an analyst at Aegis Equities Research, which is owned by Morningstar.

"This announcement has been a long time coming and, realistically,Telecom was the only company that should have been given the job," Wu says.

"Unfortunately, that is not the situation in Australia where Telstra should be in the exact same position."

Chorus will be involved in the roll-out to 24 of the 33 regions covering 69% of the population.

As part of the deal, Telecom will separate Chorus into a new operating company by the end of calendar 2011, leaving Telecom as a retail-focused company with fixed line, mobile and information and communications technology company.

"Between 2012 and 2015, fibre will be delivered first to priority customers including hospitals, schools and business. The extended roll-out will allow Chorus to sweat its existing copper network, benefiting shareholders," Wu says.

While Telecom retains strong market positions in most areas, these are increasingly under threat. Cash generation remains strong and cost-cutting is helping fend off competitive pressures but UFB will change the landscape completely.

He is currently reviewing his valuation of the stock, Wu says.

 

 

Recommendation: Hold.



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