time to buy

ABN Amro:

Telstra has said it will upgrade its HFC cable network to 100Mbs, with 200Mbs to follow, at a cost of A$300m for 2.5m households. We have long considered Telstra would build metro area HS BB. With Telstra out of NBN, we see prices remaining under pressure, but long-term value looks relatively secure. The stock has been under a negative sentiment cloud and looks headed to $3 where we think it's a great buy for a trade. Buy .

Telstra to increase HS BB capacity to 200Mbs in 2.5m-household footprint
Telstra plans to invest about A$300m to upgrade its HFC cable broadband network to 100Mbps, initially with nearly 1m households in Melbourne to be upgraded by Christmas. The company plans to upgrade a total of 2.5m households in five cities, including Sydney, Brisbane, Adelaide and Perth. It expects further upgrades to take the speed to 200Mbps.

NBN decision imminent� negative, but underlying valuation is supported
Although there is a good underlying business case for the HFC spend, we consider the timing important with the NBN decision coming up. Although this is negative for Telstra, we believe it is likely to have only a marginal impact on long-term value drivers.

Valuation retained at A$4.39; retain Buy recommendation
ABN AMRO valuation remains at $4.39. Key downside risks include higher costs or capex, IT projects running over budget through 2H09, or further sales or earnings impact as recession emerges or with slower mobile growth. We see a likelihood of another carrier being selected for the NBN, and likely proposed additional NBN regulatory burdens may be worse than we expect.