Brokers Forecast More Telstra Falls

The Age

Wednesday December 17, 2008

Dan Oakes, Telecommunications Reporter

PRESSURE has intensified on Telstra boss Sol Trujillo after brokers forecast a fall in the company's share price over the next year following the Government's decision to shut the telco out of the bidding for the national broadband network.

Telstra lost a further $1.4billion in market value yesterday after $6billion was wiped off on Monday following the Government's announcement.

The company's shares lost another 3 per cent, or 11, falling to $3.54, their lowest close in more than two years.

Citi analysts downgraded Telstra's projected share price from $4.20 to $3.40 and estimated that there was a less than 5 per cent chance of Telstra re-entering the network-building process.

"Telstra's aggressive approach with the Government looks to have backfired in what could be one of the biggest telco shake-ups of all time," Citi said in a note to clients.

"This signals a resolve by the Rudd Government to execute on its social policy objective for broadband with or without Telstra's participation. It appears to us that Telstra management has materially underestimated this resolve."

BBY's Mark McDonnell said there were several factors likely to affect Telstra's earnings, including who won the contract, the extent of the Government's ownership of the network, the constitutionality of any legislation and the winning bidder's ability to access Telstra's copper lines.