Not sure if this has been...

Not sure if this has been posted.


http://www.theaustralian.news.com.au/business/story/0,28124,26091770-5001942,00.html


Should I sell my Telstra shares?

The short answer: no.

Perversely, the government's ultimatum to Telstra to physically untangle its network from its retail business provides a smidgin of certainty. Shareholders now know they will own two companies after Telstra complies with the minister's decree.

The first will be a network company. It will have about nine million residential and business customers, plus a clutch of wholesale customers who pay to access Telstra's network to connect their own customers. The regulator -- the Australian Competition and Consumer Commission -- will have very strong powers to set and control the price of access to this network.

It will effectively operate along the lines of a utility and will therefore generate steady earnings, but with minimal growth.

The second will be a retail company. It will still own some networks, such as the Next G mobile network and the Next IP network that Telstra spent several billion dollars constructing over the past few years. These networks are the platform for delivering you-beaut services such as wireless broadband internet, 3G mobile and fixed line broadband connections via the HFC cable network or ADSL2+. In addition, this company will own Sensis and a 50percent stake in Foxtel.

This scenario assumes Telstra submits a plan the ACCC finds acceptable, thereby allowing Telstra to keep its Foxtel and HFC cable assets.

On separation, the market should be able to transparently value each business. It may be that the parts are worth more than the whole, even after allowing for the cost of the exercise.

It is possible most of the bad news is already reflected in the share price. If so, shareholders have little more to lose and much to gain by hanging in there. After 10 years of transforming the business, Telstra's cash flow is healthy and able to sustain the current dividend or even increase it, though that is for the board to determine in light of the new information.

Greg Fraser, analyst, Fat Prophets