Thursday, October 16, 2008

Revisiting Telecom New Zealand

I have been a much vocal basher of Telecom New Zealand [TEL] for a long time.

It has been poorly managed for more than a decade; management didn't invest in the company, they despised their customers, often purchased the wrong technologies and have been reactive rather than proactive to competition, especially to their main mobile competitor Vodafone.

While all this has happened, the share price of the company has slid from a high of nearly 10 bucks NZ to $2.42 at close of the NZ stockmarket today.

The 2009 net profit could be as low as NZ$485 million, after a $713 million profit for the 2008 year.

The company is faced with big upgrade costs to modernise their aging fixed line network, their mobile capability and the roll out of a decent broadband offer.

All this negative news, in conjunction with current global market volatility, is clearly going to put further pressure on the share price and we are likely to see a market price closer to 2 bucks before we see the share price go above $3.

I don't say this because of my Telecom bias, I simply mention it because there are currently fundamental reasons why the stock price should slide.

All is not lost though!

If one has the testicular fortitude to buy the stock as it gets closer to 2 dollars, one could well be rewarded when the capital investment starts to pay off.

Telecom isn't about to go out of business-people will always need to communicate- it will still pay a reasonably healthy dividend and a culture movement towards helping their customers will eventually hit home.

It is well worth a punt.

From Amazon

Managing the unmanageable: with 43,500 Intranet pages to oversee, Telecom's manager information services, Sally Myles, manages what is probably New Zealand's ... sities ): An article from: NZ Business

Buy new: $5.95
Available for download now

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c Share Investor 2008

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