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Analyst Calls For Telstra VoIP Resonse |
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Written by Adam Gosling
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Friday, 28 April 2006 |
UBS telecommunications analyst Simon Smiles has put it about that the Telstra share price would be a lot healthier if it made some sort of reaction to the VoIP threat to its revenues.
We don’t agree, but then your correspondent is no stock market analyst.
While PSTN will ultimately lose the war with IP Telephony, there’s no point in Telstra hastening its decline, by entering the fray too early.
Smiles says Telstra ought to aggressively fight VOIP by decreasing its PSTN pricing immediately to head-off the migration of its fixed-line customer base.
"We believe that the optimal strategy for Telstra is to aggressively cut its fixed calling pricing to reduce VoIP's value proposition," Smiles told the major metro media. "This would materially impact near-term earnings but should increase Telstra's medium and long-run fixed calling volumes, market share and shareholder value."
Smiles reckons that if Telstra accepted a 50 per cent decline in fixed line yields by 2006/07 and doubled the current forecasts of termination revenue the share price could rise as high as $4.65.
This all happened before the market started moving its money out of commodities and putting some of it back into Telstra. The Telstra share price is going up in a falling market reaching $3.99 at lunch time.
Telstra’s new management has made much of the anticipated loss to its fixed-line revenues due to the increase in mobile phone usage and the rise of IP Telephony, but the telco is yet to make any moves to combat the changes in the SMB and consumer markets, perhaps because it is one of the biggest winners in the mobile space.
But UBS’s Smiles says that Telstra should react and react quickly, either bundling fixed calls, or cutting calling rates.
A time will come when Telstra is forced to react, but with 8 million fixed line phones on its books, plus the wholesale custoemrs it has giving it 95 per cent of the market, timing its move will have to be a carefully planned exercise.
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