what's the take on sp telemedia

I know I've posted a lot on Sot but having found this article written by Business Spectator, would like to share this info on why I will continue to hold and affirm why I think it is a hold and long term buy. I also refer you to the share prices of the other companies which rank below SOT.
Quotation from Business Spectator, dated 26 March 2009

"Never mind the NBN

While you were distracted by all the hype and speculation about the National Broadband Network there was a renaissance at the smaller end of the telco world.

Underlying profits at several smaller companies surged in the latest half year reporting period. Earnings before interest, tax and depreciation (EBITDA) jumped 35 per cent at iiNet, threefold at SP Telemedia and doubled at Macquarie Telecom.

The profit surges at iiNet and SP Telemedia are due to the benefits of mergers completed last year and the strong rise in the take up of high speed broadband.

After several years of being in the doldrums things are looking up for the smaller companies fighting for the 20 per cent of industry profits not grabbed by Telstra.

The overall news has been positive, notwithstanding the fact that Primus Telecom's parent in the United States was placed in Chapter 11 bankruptcy and Telecom New Zealand subsidiary AAPT was effectively put on the auction block again.

One broadband supplier riding the wave of profitability, David Teoh, says the potential damage to the industry from the NBN leaving network assets stranded has been overestimated.

Teoh, who is executive chairman of SP Telemedia, is not particularly worried about the threat from the NBN to the 322 Dslams he has installed in Telstra exchanges. A Dslam is a network device that transmits high speed broadband through copper phone lines.

Teoh says there are three good reasons why the NBN will not pose a threat to SP Telemedia or other broadband competitors utilising Telstra's network.

Firstly, the NBN is primarily a scheme for providing broadband in rural areas and not in urban areas where SP Telemedia's 332,000 broadband customers are located. Improved network infrastructure in rural areas should benefit those wanting to compete with Telstra.

Secondly, consumers will be reluctant to switch to the NBN from the existing ADSL 2+ plans that offer speeds in excess of 12Mbps and monthly download limits of 50Gb for $50 a month.

Teoh says $50 is a critical price point. He does not believe urban consumers will pay an extra $20 to $30 a month to take up an NBN broadband service at an inferior speed of 12Mbps.

Thirdly, he says the NBN will have to offer open access, which will make it possible for SP Telemedia and others to switch their equipment to the kerb-side nodes.

The NBN tender documents said it would promote the long-term interest of end-users and facilitate competition through open access arrangements that ensure equivalence of price and non-price terms and conditions, and provide scope for access seekers to differentiate their product offerings.

Teoh this week delivered half yearly results that confirmed he is committed to meeting promised profit guidance after last year's merger with his privately owned TPG. At the time he made it clear that he believed SP Telemedia was in need of cultural change and had to rebuild the trust of investors (LINK: SP Telemedia's growth gamble, September 24, 2008).

SP Telemedia is now clearly the third largest publicly listed telco as measured by EBITDA. Teoh has committed to EBITDA this financial year of $93 million. That is ahead of the EBITDA of AAPT, iiNet and Macquarie Telecom. It ranks SP Telemedia behind Telstra and Singapore Telecommunications subsidiary Optus.

Teoh says there will be more consolidation at the smaller end of the telco sector. He would not be surprised if the Australian arm of Primus Telecom was put up for sale. It earned a gross profit last year of $130 million on revenue of $325 million.

However, Teoh says that until the NBN situation becomes clear all telcos will trade at a discount to reflect the uncertainty. " end quote.

SOT overvalued, I don't agree.