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Structural separation boosting the share price
Paul Budde Communication Pty Ltd, Aug 2011, Pages: 7
Telecom Investment Research NoteThe first results of structural separation look promising. Telstra in Australia and Telecom in New Zealand are both in the process of a structural separation. Like every other incumbent telco in the world these two companies initially resisted any reforms that would lead to structural separation. However both have now not only accepted their fate but have positively reacted to the change.
Now, a year later Telstra announced their transformation strategy, it is evident that this new approach was a masterstroke and that Telstra has re-established itself as the competition’s market leader. This has taken the industry by surprise as few thought that the incumbent would be up to such a task. Now, bolstered by its success, Telstra could become even more successful in times to come.
Driven by a combination of higher revenue and tight cost management the company has released a stronger than expected FY11 result. The result was driven by the core NZ operation, and in particular strong cost management.
What has been promising is that both companies saw a stronger second-half performance and that is creating the confidence needed to move into 2012.
Companies mentioned
Companies mentioned in this report include – Telstra, Sensis, Optus, Telecom New Zealand, Chorus, AAPT, Vodafone, 2degrees.
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