for sale, page-5

Hi Forrest,

Looking at the big picture, we can see the following negatives.

1. The TLS sale won't be sufficient grounds for a DD. Govts tend to threaten DD's but rarely act. DD's tend to have unexpected consequences.

2. TLS is struggling to hold its ground in the mobile market, which is the main growth area. While there's a question mark over mobiles I can't see the price going too far.

3. The threat of a total sale may put downward pressure on the price since it's in the insto's best interests to hold the price down a la AMP.

The govt can talk loudly about a better price but they have limited room to move.

The most obvious stimulus would be to increase dividends. However that signals that TLS has become a yield play rather than a growth stock. The paradox is that while it may improve the price it makes the coy less attractive to big investors.

Now to the positives.

1. Telco indexes around the world are starting to show signs of life.

2. Lifting the dividend would lift the share price immediately.

3. If world markets turn down TLS would be attractive as a defensive stock.

Just my thoughts. I'm comfortable with my wife and son holding on to their T1, but I think there are better buys around atm. (I just don't know what they are. lol)

PS The dog says to tell you that apart from the rising AUD impacting RIO they put out this Press Release today:

Coal & Allied earnings outlook and operating changes
26 June 2003

Coal & Allied, Rio Tinto's 75.7 per cent owned subsidiary, today announced that it expected first-half earnings to only break even as a result of sharply deteriorating market conditions for Australian export coal in the first half of 2003.

This compares with first-half earnings in 2002 of A$104.7 million and 2002 second-half earnings of A$55.0 million

Managing Director of Coal & Allied, Mr. Gary Goldberg said, “As we foreshadowed at the company’s Annual General Meeting in April, we are being affected adversely by the sharp movement in US dollar exchange rates, lower coal prices, increased demurrage costs and the increasing proportion of lower priced spot sales for our thermal coal.”

“In recent months we have been hit hard as the Australian dollar has continued to strengthen, lowering export coal prices in Australian dollar terms by around 25 per cent compared with 2002. In addition demurrage costs have increased to around one US dollar per tonne.”

“For every one cent increase in the value of the Australian dollar against the US dollar our net profit after tax is reduced by around A$9 million. Similarly, for every one US dollar fall in the export coal price our net profit after tax is reduced by around A$29 million,” Mr Goldberg said.