By Jenny Ruth
Thursday 7th October 2010
|Text too small?|
Telstra Corp. will have a tough time convincing sceptics "that this time it is different" in delivering its "Project New" which follows its 2005 "Transformation" program, says Peter Warnes, an analyst at Aegis Equities Research, which is owned by Morningstar.
"Nothing new - heard it all before - same old, same old - promises, promises," Warnes says. "One either believes or disbelieves or is somewhere in the middle. We sit right of centre with a believer bias," he says.
Doing nothing isn't an option and "at last management is listening to front-of-house staff - those at the customer coal face."
Project New aims to improve customer service, retention and growth in customers and to simplify the business and is service oriented rather than aimed at cutting costs.
"Management is willing to sacrifice EBITDA (earnings before interest, tax, depreciation and amortisation) margin to get EBITDA growth. Driving EBITDA growth is paramount in growing the business. But growth cannnot occur without delivering service at the core," Warnes says.
While the sharp deterioration in the share price suggests Telstra should be a strong "buy," it still has operational and execution hurdles to clear.
However, comments that cashflow forecasts will allow payment of a 2011 dividend of 28 cents per share fully franked, should the board elect to do so, are reassuring, he says.
DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.
No comments yet
Telstra shareholders set to approve NBN split
Daily ShareChat: Telstra
Daily ShareChat: Telstra
Telstra returns to debt market with 1 billion euro sale of 10-year bonds
TelstraClear earnings growth stalls amid slower capital spending
Telstra cuts sales forecast for 2010, sees no revenue growth
Telstra rejigs structure, brings NZ business into single trans-Tasman market
Clear sale gets Commission green light
Market responds to US sentiment
NZ market dives on shock US siege