Telecom New Zealand Ltd: Chorus or Bust

Telecom New Zealand Ltd [TEL.NZX] has been in the news for the past week because the government has announced that they are going to be the company that will roll out the majority of the taxpayer subsidised Fast Fibre Network (FFN) that will apparently provide far greater speeds for our internet services than we currently have.

This means that Telecom NZ must split into two separate companies in order to satisfy the rules and regulations that government have set down for the implementation of the FFN.

This will mean that Chorus, the part of Telecom whose business it is to build and maintain telecommunications infrastructure for themselves and other players and its retail arm, Telecom Retail - the part of the company that most customers of Telecom deal directly with and where they buy their mobile, internet or fixed line products - must be split into two completely separate companies. This means separate listings on the stockmarket for both companies and a duplication of a whole host of management from the floor sweeper middle manager right up to the CEO.

Of course this means cost to separate and will be bourne by TEL shareholders in the first instance and customers through higher prices as a secondary affect of this.

Investors will of course be wondering to themselves, well which company of the two should I invest in and if I am already a TEL shareholder which stock should I ditch, if any?

In my humble and not so humble opinion I would put my money of the Chorus part of the business. It is the part of Telecom that has a huge monopoly through the domination of their telecommunications infrastructure - copper and fibre cable criss-crossing the country - and as I really love monopolies this part of the companies business will do well, especially as they appear to have a unregulated first 10 years where they can set prices and the only arbiter of consumer fairness will be the usually intemperate Commerce Commission.

While Telecom's retail division has a few million customers that the new Chorus will probably look after, competition in the telecoms retail area should eventually keep all important margins down from present levels and that will impact on the profitability of the new separate retail division of Telecom.

The split coming at the end of 2011 will mean investors in Telecom will receive stakes in the two new separate Telecom entities and will probably do well if they bought the companies shares at the right price.

It might be wise though for them to consider selling shares in the retail company and stock up on Chorus shares.

My pick is that Telecom will take this opportunity to ditch the Telecom name altogether, a name wrapped up in so much negative history that their retail business would do better to leave that all behind.

Judging by their recent logo shoosh-up it is bound to be something silly.

I'm picking Burst!


Telecom Split Details

Telecom Split

Telecom NZ @ Share Investor

Share Price Alert: Telecom New Zealand Ltd 4
Share Price Alert: Telecom New Zealand Ltd 3
Share Price Alert: Telecom New Zealand Ltd 2
Share Price Alert: Telecom New Zealand Ltd
Telecom New Zealand 2011 first half profit review
Telecom New Zealand 2011 first quarter profit review
Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download TEL Company Reports
Discuss TEL at Share Investor Forum - Register free


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c Share Investor 2011

Share Price Alert: Telecom New Zealand Ltd 3

Telecom NZ Ltd [TEL.NZX] shares have had an amazing run over the last month or so where the share price has taken off from $1.95 in mid April to finish trading at $2.33 yesterday, a rise of almost 20%.

With a share-price last reached in February - a 52 week high for the stock - the stock looks like getting overcooked to me and investors wishing to take a punt on anything that may come out of the fibre network rollout may want to temper their excitement because any additional revenue coming from it is many years away.

For the majority of the last year shares have been trading below 2 bucks and this is on 4 pieces of news out a month ago ( 1, 2, 3, 4 ) mostly related to taxpayer funded broadband.

The market is excited by the prospects for Telecom that subsidised broadband might bring but the payback for investment by the taxpayer and by the company itself is uncertain especially given the low speeds the company indicate their new fibre might bring and the restrictions and frustrations that will bring for customers as they realise they will not be able to do even a fraction of the things their mates overseas have been able to do for a decade or more already and that future speeds for global internet speeds (sans NZ) will be hundreds of times faster than ours.

I have a gut feeling the increased buying has come about from speculation that the company will win the majority of the tenders to rollout taxpayer funded broadband and if this happens Telecom as a company will have to be split into 2 separate companies, each presumably with its own NZX listing. Investors clearly see more value in the company as two seperate entities and see windfall profits if the company splits.

There is of course no guarantee that Telecom will win the majority of the government contracts, but more likely than not it will, and history typically shows that investors do benefit from company splits of this kind.

Market watchers though are ignoring the bungles the company has mismanaged with the introduction of new services and technology in the past so I remain skeptical of share price increases based on the possibility that the fibre roll-out will bear some positive fruit.

Until then performance for the company is likely to be more along the lines of weakening revenue, smaller profits and cost cutting.

Buy closer to 2 bucks on the inevitable pullback.


Share Price Alert Series


Port of Tauranga Ltd
Freightways Ltd 3
Goodman Fielder Ltd 2
Freightways Ltd 2
Telecom New Zealand Ltd 2
Ryman Healthcare Ltd
Charlies Group Ltd
Fletcher Building Ltd 2
Contact Energy Ltd
Steel & Tube Ltd
Telecom New Zealand Ltd
New Zealand Stock Exchange Ltd
Mainfreight Ltd 2
The Warehouse Group Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd 2
Fletcher Building Ltd
Restaurant Brands Ltd
Mainfreight Ltd
Tourism Holdings
Goodman Fielder Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd
NZ Refining Ltd
Freightways Ltd
Xero Ltd

Telecom NZ @ Share Investor

Share Price Alert: Telecom New Zealand Ltd 2
Share Price Alert: Telecom New Zealand Ltd
Telecom New Zealand 2011 first half profit review
Telecom New Zealand 2011 first quarter profit review
Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download TEL Company Reports
Discuss TEL at Share Investor Forum - Register free


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c Share Investor 2011

Share Price Alert: Telecom New Zealand Ltd 2

Lets face it, shares for Telecom NZ Ltd [TEL.NZX] have been a pig for years but especially for the last year where they have traded around the 2 dollar mark and touched $1.78 last June.

For the last 6 weeks shares have been trading below 2 bucks but over the last 5 trading days shares have shot from $1.95 to finish up 10c yesterday at $2.15 - a 10% rise. This is on 4 pieces of news out over the last week ( 1, 2, 3, 4 ) mostly related to taxpayer funded broadband.

The market seems excited by the prospects for Telecom that subsidised broadband might bring but the payback for investment by the taxpayer and by the company itself is uncertain especially given the low speeds the company indicate their new fibre might bring and the restrictions and frustrations that will bring for customers as they realise they will not be able to do even a fraction of the things their mates overseas have been able to do for a decade or more already and that future speeds for global internet speeds (sans NZ) will be hundreds of times faster than ours.

Market watchers are ignoring the bungles the company has mismanaged with the introduction of new services and technology in the past so I remain skeptical of share price increases based on the possibility that the fibre roll-out will bear some positive fruit.

With a 52 week high of $2.33 reached in February the share price looks like getting overcooked to me and investors wishing to take a punt on anything that may come out of the fibre network rollout may want to temper their excitement because any additional revenue coming from it is many years away.

Until then performance for the company is likely to be more along the lines of weakening revenue, smaller profits and cost cutting.

Buy below 2 bucks on the inevitable pullback.


Share Price Alert Series

Ryman Healthcare Ltd
Charlies Group Ltd
Fletcher Building Ltd 2
Contact Energy Ltd
Steel & Tube Ltd
Telecom New Zealand Ltd
New Zealand Stock Exchange Ltd
Mainfreight Ltd 2
The Warehouse Group Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd 2
Fletcher Building Ltd
Restaurant Brands Ltd
Mainfreight Ltd
Tourism Holdings
Goodman Fielder Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd
NZ Refining Ltd
Freightways Ltd
Xero Ltd


Telecom NZ @ Share Investor

Telecom New Zealand 2011 first half profit review
Telecom New Zealand 2011 first quarter profit review
Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download TEL Company Reports
Discuss TEL at Share Investor Forum - Register free


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Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2011

Telecom New Zealand 2011 first half profit review

The Telecom New Zealand Ltd [TEL.NZX] half year 2011 result out today of NZ$164 million net profit after tax is 32.2% lower than the result for the same period last year. This comes on gross revenue of $2,583 billion, down 3.3% on last year.

This comes in a year of turmoil for the company where its share price plunged and regulatory issues continued to hamper growth and future planning.

Telecom CEO, Paul Reynolds said , ‘Telecom’s delivery of the turnarounremains on track, with EBITDA growth in the second quarter. The quarter saw progress on a range of fronts, including the addition of 60,000 customers in mobile, Telecom Retail attracting 64% of broadband connection growth, reduced fixed line churn and the success of our cost out programme".

I see more of the same for full year 2011. With a stagnant to dropping revenue base the only way profit can grow slightly or stay at current levels is to cut operational costs further. Telecom have tried to do this over the last half but with mixed success as clearly the bottomline shows this.

Shareholders might like to look for more positive news from the company for the medium term 2012-2014 as their foray into the Government fast broadband initiative rolls out and could well mean an end to falling sales.

Until then expect the status quo


Key Points

Net profit: 166,000; Down 32.2%; 243,000

Total operating revenue and other gains
(before adjusting items):

2,583,000; Down 3.3%; 2,671,000

Earnings per share: 9 cps; 13 cps

Second Quarter Dividend: 3.5 cps

Increased competition impacting on margins

2011 HY Profit Detail

Transcript from Investor Briefing
Management commentary
Presentation
Accounts


Telecom NZ @ Share Investor

Telecom New Zealand 2011 first quarter profit review
Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download TEL Company Reports
Discuss TEL at Share Investor Forum - Register free


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Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2011

Telecom New Zealand 2011 first quarter profit review

The Telecom New Zealand Ltd [TEL.NZX] first quarter 2011 result out today of NZ$103 million after tax is 36.8% lower than the result for the same period last year. This comes on revenue of $1.316 billion, down 2.9% on last year.

This comes in a year of turmoil for the company where its share price plunged and regulatory issues continued to hamper growth and future planning.

Telecom CEO, Paul Reynolds, said operational performance was "satisfactory with good cost control offsetting significantly higher regulatory costs and intensifying competition."

I see more of the same for full year 2011. With a stagnant to dropping revenue base the only way profit can grow slightly or stay at current levels is to cut operational costs further. Not good for the long-term.


Key Points

Net profit: 103,000; Down 36.8%; 163,000

Total operating revenue (before adjusting items): 1,316,000; Down 2.9%; 1,356,000

Earnings per share: 5 cps; 9 cps

First Quarter Dividend: 3.5 cps

Increased competition impacting on margins


Management appear reticent to make too much of future profit levels because of probable impacts of the rollout of the fast fibre network, but they have indicated a small increase in earnings before tax for 2012 - 2013.

2011 Profit Detail

Transcript from Investor Briefing
Management commentary
Presentation
Accounts


Telecom NZ @ Share Investor

Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download TEL Company Reports
Discuss TEL at Share Investor Forum - Register free


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Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010

Telecom Chart: Lazarus Recovery on lower volume

Since I have been closely following the Telecom NZ [TEL.NZ] share price I have wondered how low the share price was going to go and if indeed lows of $1.81 reached just a month ago meant that the stock was oversold.

Well, since then the share price has put on 12% on about half the volume (see 23 month TEL chart above) of the June share price plunge and is currently trading at $2.02. Short termers will be pleased with their current gains and have seen a new trading pattern emerge where opportunities exist for gains of more than 10c. Hard to say what might happen next short term but investors with a 12% gain might consider realising some cash.

Of interest too will be medium term investors who are trying to factor in what the company could be worth if they win a government contract to set up the new fibre network around the country and will be subsequently demerger Telecom into two separate business units, Chorus, their Network company and Telecom Retail, their public face and presence.

The value of the two units will be difficult to assess given no profit or revenue projections for a Chorus with the responsibility to build, run and sell business off the new network but Telecom see profit to be made so medium term the company could be worth a punt.

Long-term my view is avoid unless you have faith in current or future management that they can turn this ship around.

By on weakness for short or medium term returns.


Telecom NZ @ Share Investor

Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


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Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010

Telecom NZ: Stock Finally Finds Support?

Yep, I am looking at Telecom New Zealand [TEL.NZ] again. Since our last visit to the house of falling knives
the stock closed yesterday at $1.83 on low volume after reaching an all-time low of $1.81 on Monday (see chart below for price history).

Over the last month the stock has been trading mostly in the $1.80 - $1.90 range with a brief breakout above $1.90 in late June.

It seems that the stock may have some good support at these levels and the market appears to be saying that this is the value of the company,unless we get more company specific bad news or there is another overall market slump - the second scenario almost being guaranteed.

Buying now at these levels if you were interested in TEL is good buying but be patient for more bad news and you could get stock for much less.

Date	Open	High	Low	Close	Value	Volume
06 Jul 2010	1.820	1.840	1.780	1.830	5,094,764.840	2,810,864
05 Jul 2010	1.840	1.850	1.810	1.820	5,238,501.270	2,870,141
02 Jul 2010	1.840	1.840	1.810	1.840	17,518,102.840	9,544,061
01 Jul 2010	1.880	1.890	1.830	1.830	12,500,097.720	6,706,357
30 Jun 2010	1.860	1.890	1.850	1.890	15,272,041.030	8,122,635
29 Jun 2010	1.900	1.900	1.870	1.890	21,519,036.210	11,368,345
28 Jun 2010	1.970	1.970	1.900	1.900	19,243,991.610	10,032,644
25 Jun 2010	1.980	1.980	1.940	1.970	15,714,758.000	8,002,182
24 Jun 2010	1.950	1.970	1.930	1.970	22,252,800.380	11,449,639
23 Jun 2010	1.900	1.950	1.900	1.950	17,504,786.530	9,172,350

Telecom NZ @ Share Investor

Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free

Discuss TEL at Share Investor Forum - Register free


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Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010

Telecom maybe oversold

Every market watcher is talking about it, just how low is the Telecom NZ [TEL.NZ] share price going to go.

Well at time of market close today the TEL share price is down 11c to a new all time low of $1.85 (see 2 month chart above) on lowish volume.

I don't want to discuss this today though.

I think the market has oversold the stock at this point and seems to be discounting the value that could be added to shareholders if the company decides to split up its various divisions so it can bid for 1.5 billion in taxpayer dosh to build a new fibre network for faster broadband in New Zealand.

The decision to split the company is by no means a definite one but beleaguered CEO Paul Reynolds indicated yesterday that this could be on the cards and the company is investigating the possibility of breaking Telecom into two parts - Chorus and Telecoms other divisions.

Depending on how a possible separation is executed, this could be a good move for existing shareholders as a split could realise them full value of the companies two parts by opening the Chorus lines/infrastructure business to the posibility of nabbing a slice of that taxpayer moola.

While there might be one-off and ongoing costs for the two separate businesses I think investors at these price levels will benefit from a separation, at least in the short term.


Telecom NZ @ Share Investor

Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


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Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010

Telecom NZ Share Price has "Jumped the Shark"

I wrote about Telecom NZ [TEL.NZ] share price back in March and at that stage, March 17, the share price had reached $2.15 at close of trading after touching $2.13. At that time an all-time low for the company since it listed back in 1992.

Well, today, thanks to more global economic uncertainty because of free spending debt laden Greeks and other PIIIGS the TEL share price has dipped below the magical 2 buck mark for the first time and it is all on for young and old. It has now "jumped the shark".

Like most other NZX traded stocks the Telecom NZ share price has traded down (see TEL comparison with the overall NZX on chart above) on very large volume today but the company still has other negative factors going against it like more money to be spent on capital infrastructure, more competition and more problems delivering adequate service in all its areas of business; Telecom landlines, Mobile, Internet and infrastructure delivery.

Below 2 bucks is an important psychological level for the share price and it is anyones guess where that level will reach but I am picking it is all downhill from here, even if global markets"recover" from the slippery Greeks.

Beware the shark.



Telecom NZ is currently trading at $2 even on nearly $25 million traded.


Telecom NZ @ Share Investor

I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010