For what it is worth a recommendation from Westpac...

For what it is worth a recommendation from Westpac Broking

Telstra Corporation Limited (TLS)

Excluded – Buy likely to participate

Recommendation 15/12/2008: Buy


Event Analysis
Event:
Telstra excluded from the National Broadband network (NBN) request for proposals RFP) process.

Impact:
* The Expert Panel has excluded Telstra. The Minster for Broadband, Communications and the Digital Economy, Stephen Conroy can accept or reject the Panels’ decision. Cabinet will make the ultimate decision and is likely to require legislation to implement.

* The Panel suggests that Telstra’s NBN proposal – lodged on November 26 - did not address small and medium enterprises in the building of the NBN. Telstra provided a SME plan to the Government in early December, and in Telstra’s view in accordance with the RFP.

* This is a set back but not irretrievable.

* TLS has several options with existing technology for future high speed broadband delivery using Hybrid Fibre Coaxial (HFC) cable networks and Wireless. The existing ADSL and ADSL2+ services will be increased to 20-25 Mbps.

* TLS is in the process of increasing the speed on the Next G™ network to 21 Mbps and aims to go to 40 Mbps by December 2009.

* Next G ™ and Next IP™ have a considerable competitive advantage and this first mover advantage will be maintained for some years.

* TLS has already significantly improved broadband speeds and customers will direct where the business goes and probably stays.

* The building of NBN is some way off. A decision in late 2009 with at least two years to complete.

* In the meantime TLS will continue to benefit from the Transformation Project which is on target to deliver significant free cash flow - $6-7bn in FY10.

* We consider TLS FY09 and FY10 dividends to be secure at a minimum 28¢ per share.

* The current price around $3.85 delivers a fully franked yield of 7.3% and 10.3% grossed up for franking.

* We continue to recommend TLS.

* No change to fair value, earnings estimates or price triggers.