The Never-Ending T3 Tale – 17 Nov 2006


MELBOURNE AUSTRALIA, 17 November 2006 – The never-ending tale that has  been Telstra (NYSE: TLS) T3 is, finally drawing to a close.  Or should it be that it is only just beginning.  The Telstra3 instalment receipts are due to list on the Australian Stock Exchange on Monday following the finalisation of the institutional offering this coming weekend.

The share price of the rest of Telstra, after making a remarkable rally, has fallen back towards the level prior to when the shenanigans started.   At the close of trade yesterday Telstra shares were trading at $3.78.  The government, according to Finance Minister, Senator Nick Minchin is not concerned, “We’re reasonably pleased with it so far” he said.

The odds are that the government is going to be able to offload around $12 billion worth of stock following the better than anticipated response from brokers who when given the choice of continuing to recommend it as a SELL, or take the opportunity of earning a bit of 2% stamping fee, did what any financial adviser with morals would do.   They tucked into the 2% wholeheartedly.  Bravo!

So, what are the prospects for the T3 and normal Telstra on Monday?  Will there be a rush of buyers piling in to pick up the stock?   Will it create an excellent ‘stagging’ opportunity to take a quick profit and run?

Or will it be a monumental fizzer?  Again, we have no idea.  But what will the appetite be for something which millions of Australians already own in their share portfolios where they have had weeks to make up their mind whether to buy it without paying commission to their broker?

Our potentially ill-informed guess is that there may very well be some activity on the first day as those investors who wanted more than they could take in the public or broker offer stock up.   But after that it is sure to be business as usual.

After all, apart from the fact that the government has flogged off a bit more of the company, nothing else has changed.   It is still Telstra.  It is still a dinosaur telecommunications company that doesn’t know whether it is Arthur or Martha.  It is still facing falling revenue and profits in its dominant sectors, whilst struggling to be competitive in areas where it is not so dominant.

Telstra 3 is the same company as Telstra 2, and it is the same company as Telstra 1.  And guess what, when the Future Fund bales out of more stock in two years it will be the same as Telstra 4.

The ASX has around 1,900 companies listed on it.  We would be VERY surprised if there wasn’t at least one other share that represented a better opportunity than this.

On another note…

The G20 meets in Melbourne today and tomorrow at the Grand Hyatt Hotel in Melbourne.   Finance ministers and central bankers from nineteen nations and the European Union are in town to, er, “tackle issues of significance for the international economy and monetary system.”   So says the official G20 website which has a picture of Uluru emblazoned across the top of the page.

Not wanting to be picky, but the last time we looked Uluru wasn’t actually in Melbourne.  We know the urban sprawl has meant that metropolitan Melbourne has expanded somewhat, but we don’t think it has expanded by several thousand kilometres to the north-west.  Of course, we could be wrong.  What would we know?!

At least they didn’t plump for a picture of the Sydney Opera House, or the Harbour Bridge.  That may have been just a little too much for Melbournians to handle. Perhaps this is the reason for the anticipated protests.  They aren’t protesting against globalisation, but merely protesting against the use of non-Melbourne landmarks to promote a Melbourne event.  They have our full support!

Kris Sayce
Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Daily Reckoning e-newsletter in 2005. He is currently the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service — Money Morning.

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