The NBR rustled up just four analysts who gave opinions on Telecom’s latest results. Here’s what they had to say:
Guy Hallwright, Forsyth Barr: ACCUMULATE
Geoff Zame, Deutsche Bank: HOLD
Greg Main, Credit Suisse: UNDERPERFORM
Tristan Joll, Goldman Sachs: SELL
Four analysts, all with different opinions. That’s better than the reverse, as we know that at least one of the gentlemen is correct. The question is which one, and I;m afraid I don’t know that answer. I would dearly like to see Telecom split into two so that investors and the Government can have certainty of which entity they are dealing with.
I do take issue with Deutche’s Geoff Zame, reported as praising the Telecom for forecasting spending LESS on capex next year.
“They’ve had the highest sales-to-capex ratio of any telco in the past 20 years so they’ve got to nail that,” Mr Zame told NBR.”
In other words Zame is praising Telecom NZ for under-investing in infrastructure over the last 20 years. That’s the primary reason they got into the regulatory and business pickle that they are in, and it was driven by short term thinking that announcing results too often to the market can lead to.
It’s far better to focus on investing for long term sustainable success. Telecom’s greatest investment was the Southern Cross Cable, which, delivered a cool $83 million to Telecom for the last year. That’s pretty good for a project that was essentially paid off 10 yers ago – the day it all went live, and rivals the sale of Yellow Pages as the overall best financial decision from the group. Each of these decisions, along with the investment in XT, was made with long term focus on what where the industry was going, and delivered results.