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Mansfield bullish as Telstra 2 D-day looms
By Christine Lacy and Adam Shand

Telstra Corp chairman Mr Bob Mansfield believes investors can decide the fate of their instalment receipts today secure in the knowledge that the company`s fresh $US1.8 billion ($3.4 billion) deal with Pacific Century CyberWorks has resolved a critical element of uncertainty.

Speaking on the eve of the final day of trading in T2 instalment receipts, Mr Mansfield said management had established a major platform for growth after successfully renegotiating its joint venture with Mr Richard Li`s PCCW to save almost $1 billion.

"I can`t be seen to be giving investment advice, but what I can say is that I will be hanging on to my T2 stock," he told The Australian Financial Review yesterday.

Telstra instalment receipts, issued at $4.50 each in October last year, will begin their final day of trading today at $2.83, giving shareholders their last opportunity to sell the underwater stock and avoid the final $2.90 call due by November 2.

Mr Mansfield briefed the Federal Government - which has been concerned about the prospect of T2 holders being out of pocket on their investment - on the company`s repriced Asian alliance on Friday.

Yesterday, he said it might be some time before Telstra`s share price reflected the value of the PCCW deal because of negative sentiment towards global telco stocks. But he said the new deal was a "solid progressive step towards enhancing shareholder value".

Mr Mansfield said that last week could be remembered as a turning point in market perceptions of Telstra after shares in the telco, Australia`s largest company, have been savaged in recent months. He said Telstra management`s confidence had been boosted by the new PCCW deal, struck on Friday after what he described as "a tough negotiation".

Analysts have welcomed the sweetened deal, with the weight of uncertainty associated with Telstra`s financial commitment to the deal and its level of risk now lifted.

Merrill Lynch said the renegotiated deal was "better than expected". "It is possible we could see a bounce in the stock price due to the release of the instalment receipt overhang and the better-than-expected outcome on the renegotiated PCCW deal," it said in a note to clients on Friday.

Under the definitive agreement, Telstra has emerged with a 60 per cent stake in the Hong Kong Telecom mobile business for a price reduced by about a quarter.

The PCCW note to which Telstra will subscribe has been cut in half to $US750 million, with its coupon boosted and security attached to the joint-venture assets.

As a trade-off, PCCW will extract the first $US750 million in debt from the infrastructure company, from $US500 million previously.

"Overall, the renegotiated deal is better than we had anticipated, especially for the convertible notes," Merrill said. "However, in our view, the mobile valuation paid is still full, particularly in light of falling mobile comparables."

Telstra`s cost per subscriber for its 60 per cent stake in the mobiles business fell from $US3,900 to $US2,950 in the new agreement.

PCCW vice-president Mr Jeff Bowden said this represented a 50 per cent premium over the prevailing regional price for mobile assets, while the 25 per cent decline in the price paid compared with a 36 per cent fall in global valuations since the deal was first struck.

PCCW`s executive director, Mr Alex Arena, said the sale of the company`s 15 per cent stake in Singapore wireless carrier MobileOne into the mobile joint- venture was back on the agenda. Telstra executives were silent on the matter on Friday and on what financial cost that might bring.


"On our ownership of MobileOne in Singapore, we will do everything we can to have that included into the wireless co," Mr Arena said. "Our intention is to inject that asset into the regional wireless company."

But Merrill stopped short of upgrading its neutral/buy recommendation on Telstra, which was downgraded in the fallout from the deal`s original terms.

"At this stage we are comfortable with our neutral/buy recommendation, based on industry-wide earnings risk and likely continued global volatility in telco valuations," it said.
 
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Autor (Datum des Eintrages): Kersken  (16.10.00 07:58:26)
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