The broker notes there are some media reports indicating Telstra will be paid no more than $8bn for cooperation with respect to the NBN network, an amount below its expected range.
Regulation of access is another issue over which Telstra shareholders could withhold agreement in the broker's view, so is another issue that needs to be dealt with before any agreement is reached.
Buy rating retained.
Target price is $4.25 Current Price is $3.08 Difference: $1.17 If TLS meets the RBS Australia target it will return approximately 38% (excluding dividends, fees and charges). Credit Suisse 25/03/2010 1 Outperform $3.80 23.4%
The Government has indicated NBN negotiations will be concluded by June/July this year and that the network can be built without Telstra.The broker suggests these comments make an agreement on a deal more difficult as Telstra looks unlikely to accept a sub-par deal.
Uncertainty on key issues of the NBN are driving Telstra's poor share price performance in the broker's view, so with the stock trading at a discount to even its bearish scenarios it suggests there is upside from any resolution of NBN negotiations.
Outperform rating retained.
Target price is $3.80 Current Price is $3.08 Difference: $0.72 If TLS meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges).
TLS Price at posting:
$3.08 Sentiment: None Disclosure: Not Held
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