T3 (Telstra Mk III) - Good, Bad, or Ugly?

[MarkB]

T3 is here...

$8 billion ($8,000,000,000) of shares - granted they are to be paid for in installments - but that's alot of new private-sector funds entering the market.

I'm curious to know what effect, if any, this will have on the equities and property markets.

T2 happened in 1999 - and the property market started surging ahead shortly thereafter - coincidence or cause and effect?

M


Telstra tempter shares for $2

ORDINARY Australians have been given red-hot incentives to buy Telstra 3 shares in the nation's largest stockmarket deal in almost seven years [since T2].

Shareholders will pay just $2 a share for the first instalment of the $8 billion sale when it opens later this month and ordinary ordinary shareholders will get a 10c discount.

The prospectus also reveals shareholders will receive three generous dividends before the final payment is due in 2008.

The cost of shares will be known in November but should be less than current market price.

The Government has given approval for more shares to be sold than planned, if there is demand.

The T3 campaign has been pitched squarely at existing shareholders, with the Government keen to "reward loyalty".

An unusual "bonus" share scheme has been struck where shareholders who hold the stock until May 2008 will be given one free for every 25 they buy in T3.

Telstra said the placement of leftover Telstra shares into the Future Fund could also drive down the share price.

The stockmarket did not like the Telstra launch, with a massive 85.9 million shares traded.

 

[grossreal]

hi pitt
telstra one had alot of mum and dads involved that didn't know alot about shares.
I don't think that will be the same second time around.
from the people I have been hearing from
its
maybe a good thing if you want techno shares but there is alot better out there.
the gov is going to need to do some thing or it will be only the superfunds that get involved and institutions.
they maybe talking down the market to get them cheap.
I'm not a great shares man but a few of my friends are and they arn't biting at the bit for t3 shares.
and I won't be buying at this stage.

 

[sailor]

I for one won't be buying any. The returns are just not there for me, compared to IP's. I also think that "M & D investor" is a bit "bored" with T's....there's been so much controversy about them in the past.

cheers
Sharon

 

[Big Aussie]

The float itself is really neither here nor there. If you WANT Tesltra shares, it may be as good as any way to buy them. That said, I hate forking out money in floats unless I know I will get the shares I paid for, but by the sounds of it, there will be plenty.
Don't expect to make a killing when the T3 shares are listed, it isn't an IPO.

The BIG QUESTION is what will happen to Telstra long-term?
It is SO badly mismanaged it SHOULD be a prime takeover target.
So what restrictions has the govt put in place to limt foreign control???

Qantas was widely tipped to fall, but the restrictions on foreign ownership appear to be working.

 

[House_Keeper]

I don't foresee any link between the T3 sale and the various Australian property markets. Other factors (supply & demand, population growth, affordability) have a much more direct influence.

Cheers,

 

[FrankGrimes]

$2 is very cheap. What would the p/e ratio be on that? I might consider buying a small batch as a small speculative investment.

 

[WashingtonBrown]

$2 is very cheap. What would the p/e ratio be on that? I might consider buying a small batch as a small speculative investment.

$2 is the first installment frank. The second installment will be dependant upon the institutional bookbuild.

And the yield is somewhat misleading - the key will be whether TLS will be able to continue paying out such a large ratio.

 

[FrankGrimes]

$2 is the first installment frank. The second installment will be dependant upon the institutional bookbuild.

And the yield is somewhat misleading - the key will be whether TLS will be able to continue paying out such a large ratio.

Oh missed that part. Thought 2$ seemed too good

 

[Andrew_A]

Yeh it's an interesting one.

Re: 99 and the TLS 1 float followed by the property boom after, coincidence. It was the best of times (shares) it was the worst of times (property). I remember what happened to a few of the floats I missed out on (Melbourne IT).. And some of the flying dogs I invested in as a retail punter who knew next to nothing (Jumbo Mall, Hot Copper... ahh memories). I think it can be neatly explained by the tech wreck followed by a sea of money moving from equity's into bricks and mortar.

Unless the market has suddenly become a more friendly caring environment it's not my experience that a great investment is the kind that is widely advertized and one you are offered incentives to join. TLS could do very well, who knows? I'm not a long term trader/investor at the moment but I wouldn't be buying TLS if I was. I saw a top analogy the other day, it went if you were choosing a horse to win a horse race would you be putting your money on the TLS horse? It's a fair enough way to think about it as an investment I think.

In my crystal ball I see short term upside as there is considerable political will aligned with a strong share price and there are a lot of people who will be interested followed by a longer term exploration of how 'cheap' a cheap share can become. TLS has destroyed share holder value at a fierce clip in a huge bull market, why will this change? It really could change but It's a question that needs to be asked.

I have very little idea about how the fundamentals work with TLS, I know their number 1 revenue stream from fixed line income is potentially an endangered species and there are rogue technology threats always on the horizon for telcos in the net age (skype and the next few big things etc).. I'm certain BHP will be an ongoing concern in 20 years time but a company like TLS? There is no rule saying they have to be around at all. On the upside they do own all the copper in the ground though I think? And copper has been booming in value!

My criteria for not investing is simply that I don't buy shares my Mum buys The mere fact she is talking about shares in a positive way at the moment (she never used to trust them!) has me concerned.

 

[Simon]

Oh missed that part. Thought 2$ seemed too good

Thats an interesting perspective.

What makes $2 cheap? They could issue 100 times as many shares and sell them at $0.02 or one hundredth as many and sell them at $200 each. The price will be the same.

What makes $2 seem so cheap? Is it purely as a comparison with the current market price?

I read somewhere that whilst the US has shares trading in the hundreds of dollars and even more (Berkshire Hathaway for example) Australian stocks usually split to keep the price under the $20 as the local market perceives anything higher as being too dear. Not so much today though with some of the banks at $30+ but was certainly true a few years back.

 

[Leandro]

I read somewhere that whilst the US has shares trading in the hundreds of dollars and even more (Berkshire Hathaway for example) Australian stocks usually split to keep the price under the $20 as the local market perceives anything higher as being too dear. Not so much today though with some of the banks at $30+ but was certainly true a few years back.

To the less informed, don't you think that owning 1000 ($2) xyz company shares sounds and feels better than owning 5 ($400) zyx shares.

 

[Tom Alaka]

Run for your lives

Telstra's business direction should be the no 1 reason for staying away.

"Next G" is a dog - its being promoted as better than ADSL, and more importantly, a commercially fair alternative for those in regional and semi regional areas.

It clearly isnt, the costs are prohibitave and data limits almost laughable. If only they had gone the FTTN path....

 

[shelldrake]

My thoughts on T3.
Lets assume you will buy 1,000 shares. Shares are currently trading around $3.75 so would cost 3750 plus brokerage charges which would be about $30.

If you buy through T3, you will need 2,000 up front. We will also save $100 due to the 10c discount for private investors. At this stage we don’t know what the final price will be, but they are saying there will be more discount, so lets assume final price will be $3.65 (pulling that figure out of my bum, I honestly have no idea what it will be). So total should be 3650, now minus the 2100 that we have paid (remember the 10c discount we get) and we have a 1550 we need to pay in May 2008. we will also only pay a total of 3550.

Next is the dividend, again they haven’t confirmed it yet, but they are aiming to guarantee a dividend of 28c for each of the 3 dividend payouts (this is another assumption). At 1000 shares that is 280 a payout and a total of $840.

That would make a total out of pocket expense of $2710 by May 2008.

If you hold onto the share till then, you will also get some bonus shares, 1 share for every 25 shares you still hold. That would be a bonus of 40 shares if you still hold the 1000 shares.

So for $2710, you get 1040 TLS shares, which from what I’ve seen looking at their past dividend history has been paying about 20c per share (or $208 per dividend pay out). That looks like to be about 15.3%. Per year.


As for the actual business plan and re-investment that Telstra is going through and working on. Well, your guess is as good as mine and I won’t speculate on that.

Please punch port holes through my thinking, I’m new to buying shares and I really don’t understand everything (I never will till I put my money in), particularly the way dividends work.

 

[WildDog]

if you are thinking of gettting some TLS shares now or soon down the track then T3 is as good as you can get at buying Telstra but if you dont want to buy Telstra any time soon then T3 doesnt really matter to you.

Dont lose sleep over the hype and the advertising blitz. Do the number and factor in some risks if it work out for you then make your decision.

 

[WildDog]

My thoughts on T3.
Lets assume you will buy 1,000 shares. Shares are currently trading around $3.75 so would cost 3750 plus brokerage charges which would be about $30.

If you buy through T3, you will need 2,000 up front. We will also save $100 due to the 10c discount for private investors. At this stage we don’t know what the final price will be, but they are saying there will be more discount, so lets assume final price will be $3.65 (pulling that figure out of my bum, I honestly have no idea what it will be). So total should be 3650, now minus the 2100 that we have paid (remember the 10c discount we get) and we have a 1550 we need to pay in May 2008. we will also only pay a total of 3550.

Next is the dividend, again they haven’t confirmed it yet, but they are aiming to guarantee a dividend of 28c for each of the 3 dividend payouts (this is another assumption). At 1000 shares that is 280 a payout and a total of $840.

That would make a total out of pocket expense of $2710 by May 2008.

If you hold onto the share till then, you will also get some bonus shares, 1 share for every 25 shares you still hold. That would be a bonus of 40 shares if you still hold the 1000 shares.

So for $2710, you get 1040 TLS shares, which from what I’ve seen looking at their past dividend history has been paying about 20c per share (or $208 per dividend pay out). That looks like to be about 15.3%. Per year.


As for the actual business plan and re-investment that Telstra is going through and working on. Well, your guess is as good as mine and I won’t speculate on that.

Please punch port holes through my thinking, I’m new to buying shares and I really don’t understand everything (I never will till I put my money in), particularly the way dividends work.

I hope you understand that dividend is not guaranty, it's at the discretion of the board. In Australia the board usually pay out dividend if they make a profit so if they continue to make decent profit chance are you getting something in your hand. In the case of TLS they already announce a guaranty dividend of 28 cents so for sure you getting your 28 cents for $2 first installment.

Also dividend is misleading you should be looking at EPS (Earning Per Share).
a company X has EPS of 10cents but pay dividend of 15c
that mean they make 10cents but they pay you 15c so they borrow 5cents from some where to pay you, either from their cash reverse or borrow from someone. This is not a good sign, the company end up carry more debt and that can only be bad for future years when they need the cash to expand or upgrade or whatever else they need to do.

I like company that carry little debt or better yet no debt and have payout ratio less than 1 (Dividend/EPS) and their business are doing so well they dont need to carry big debt to expand and prosper.

 

[WildDog]

T3 is here...

$8 billion ($8,000,000,000) of shares - granted they are to be paid for in installments - but that's alot of new private-sector funds entering the market.

I'm curious to know what effect, if any, this will have on the equities and property markets.

T2 happened in 1999 - and the property market started surging ahead shortly thereafter - coincidence or cause and effect?

[/I]

I think .com crash make people nervous and pulling the $$ out of the market
and where else to put the money but housing .. TLS is big but it's not the only market mover and shaker, there are many other like BHP CBA Westfield etc...
Wont see another housing boom until there is a major correction in the market

 

[Goldminer]

Telstra is a dead duck

I personally would not invest a red cent in a dead horse, have many friends who use to be employed by telstra, and they have nothing positive to say about the orginisation. Its a dinosour on death row!!!! Crumbling infrastructure, poor workplace moral, and heaps of competition. It will be a sad story in Australian history before too long.

 

[shelldrake]

I personally would not invest a red cent in a dead horse, have many friends who use to be employed by telstra, and they have nothing positive to say about the orginisation. Its a dinosour on death row!!!! Crumbling infrastructure, poor workplace moral, and heaps of competition. It will be a sad story in Australian history before too long.

just curious, is that the emotional mind talking, or do you have figures to back that up?

I understand telstra to be somewhat bad, i know they've burnt me in the past. what i see when i look at them, is a process of continual re-investment. they have a desire to keep their cashflow in the positive, we often hear of their cost cuting efforts, either by the dreaded indian call centers and the reduction in money wasting efforts like phone booths. they come across as very aggressive in marketing and sales and put a lot of time and effort in keeping a positive PR unit.

just my .02c plus GST

 

[grossreal]

hi goldminer
I haven't heard such a glowing thought of a company for a long time.
You may want to send your post as a sort of application or cv to run telstra.
I think they need some one to give them a shake

 

[WildDog]

I personally would not invest a red cent in a dead horse, have many friends who use to be employed by telstra, and they have nothing positive to say about the orginisation. Its a dinosour on death row!!!! Crumbling infrastructure, poor workplace moral, and heaps of competition. It will be a sad story in Australian history before too long.

you wont find one big company that dont have disgruntle employee
nor a company without competition.
Dont let your personal emotion get into the way of the business.