Thought you might be interested

McQ view on TLS:

Telstra (TLS) $4.50

Short term Underperform, long term Hold, risk factor
Low/medium

US telco giant, WorldCom, yesterday announced that it will
restate its 2001 and first-quarter 2002 financial statements to
reduce operating profit by a total of US$3.85bn and had
terminated its Chief Financial Officer’s employment contract.
There has been speculation that this would put WorldCom in
breach of its debt covenants and force it into Chapter-11
bankruptcy.
In Australia, WorldCom has been an aggressive competitor in
the Australian corporate data market. Corporate data, along
with mobile, has been one of the primary sources of growth
for Telstra (and other telco companies) over the past five
years.
However, WorldCom is not the only aggressive competitor in
the market and its withdrawal would not materially affect the
current structure.
Our analysis suggests that there are a number of structural
issues with the Australian corporate data market which lend it
to ongoing price wars and “irrational pricing”. Indeed the
conduct of players in the market appears to perpetuate rather
than compensate for these structural shortcomings.
Continuing pressure on corporate data revenues, potential for
market share loss in mobile, and negative sentiment due to
the WorldCom developments are likely to maintain downward
pressure on the share price.
However, in light of Telstra’s yield (now at 4.9% fully franked)
and low market expectations, we will be closely monitoring
any potential positive catalysts.

We maintain our short term Underperform, long term Hold
recommendations for Telstra.