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Telstra T3 Information

Discussion in 'Shares' started by NickM, 20th Oct, 2006.

  1. NickM

    NickM Co-founder Staff Member

    20th Jun, 2005
    Dear forumites,

    This was forwarded to me by Lifespan Financial Planning. It is not my professional or personal opinion nor should it be construed as advice.

    It is just one persons perspective on the float to help with your decision making.

    Good Luck !


    Telstra T3 Offer

    The base offer size is 2.15 billion shares unless the over - allocation option is exercised. The offer will be by way of instalment receipts ($2.00 for retail investors). The retail offer consists 3 parts: a shareholder entitlement offer, a firm offer, and a general public offer. The Institutional offer will set the price of the final instalment. The final instalment will be announced by 20 November 2006 and is payable by 29 May 2008.

    Telstra Offer Overview

    • Instalment receipts - two instalments over 18 months capturing 3 dividends
    • The Board intends to declare a 28 cent fully franked dividend in FY07

    Retail Offer

    • First instalment of $2.00 per share, a 10 cent discount to the Institutional price
    • 1:25 loyalty bonus shares for retail investors who hold through to final instalment
    • 3,000 shares for existing shareholders, 2000 for all other applicants

    Retail Entitlement Offer
    • 1 for 2 ratio(min 3,000 shares and cap of 200,000 shares)
    • Brokerage - 0.75%

    Firm Offer
    • Brokers and Financial Planners, Cap of 100,000 at Retail Price – 200,000 more per account at institutional price
    • Brokerage - 1.25%

    General Public Offer
    • Guaranteed minimum allocation of 2,000 shares
    • Brokerage - 0.75%

    Total Retail price capped at VWAP over 3 day Institutional Offer

    Institutional Offer

    • 3 day bookbuild - after close of Retail offer - will set the final Instalment amount for all investors
    • Institutions receive an "allocation benefit" on 1 for 2 basis
    • No price discount, caps or bonus loyalty shares
    • Broker-sponsored bids permitted

    Important Dates
    • Prospectus Date: Mon 9 October 2006
    • Record Date for Shareholder Entitlement Offer: Fri 13 October 2006
    • Retail Offer Opens: Mon 23 October 2006
    • Retail Offer Closes: 4.00pm (local time) Thur 9 November 2006
    • Institutional Offer opens: Wed 15 November 2006
    • Institutional Offer closes: Fri 17 November 2006
    • Final instalment amount and basis of allocation announced by: Mon 20 November 2006
    • Conditional and deferred settlement trading of instalment receipts expected to commence on ASX: Mon 20 November 2006
    • Institutional Offer settlement: Fri 24 November 2006
    • Instalment receipt transaction confirmation statements expected to be despatched by: Thur 30 November 2006
    • Normal settlement trading of instalment receipts expected to commence on ASX: Fri 1 December 2006
    • Last date for payment of final instalment (Final Instalment Due Date): Thur 29 May 2008

    Reasons to Invest

    • The expectation is that a fully franked dividend of 28 cents will be payable in fiscal year (FY) 2007. This equates to a dividend yield of 14% on the first $2 instalment. However there is no dividend guidance thereafter.
    • Retail investors will pay 10 cents less than institutions
    • Bonus Loyalty Shares, a client holding the instalments and making the final payment by 15/5/2008 will receive one new share for every 25 instalments held.
    • A successful transformation of Telstra through its current capital expenditure program could result in high shareholder returns in future years.

    Risks and Negatives

    • Telstra is a slow growing company with projected revenue growth of 2.0 to 2.5% pa. to fiscal year 2010. In addition most brokers are neutral on the stock.
    • In November 2005, the company announced a 5 year transformation strategy aimed at lifting profitability. There are always risks when fundamental changes occur in a business model and systems. The plan involves large amounts of capital expenditure which peak in 2007. However the majority of the benefits of the plan are expected to materialise after 2008.
    • Telstra faces massive regulatory risks. The ACCC has broad powers to determine: which Telstra services competitors can access, and; the terms and conditions under which Telstra provides access
    • It should be noted that Telstra recently abandoned the rollout of its fibre network due to an unfavourable regulatory outcome.
    • Traditional high margin cashcows such as its fixed line business continue to decline.
    • The "Future Fund" will have a large shareholding in Telstra which will have to be eventually sold down, impacting the stock price.
    • While it is the intention to pay a 28 cent dividend in 2007 this is not guaranteed, it depends on company performance. There is no guidance on future dividends as well. Currently Telstra is paying a higher dividend than its operating earnings in order to prop up the stock price ahead of the offer. Unless earnings improve the dividend will have to eventually be lowered.
    • The final instalment price, i.e. the total price, will be set after retail investors have forked over their $2 first instalment payment.

    All clients should read the prospectus which sets out the risk factors in greater detail.


    The Offer appears to be much more attractive on a 12 month view for a 14% fully franked yield. Looking longer term there is a huge amount of regulatory uncertainty and it is difficult to even know what the company will look like. Risk averse clients can certainly find better risk/reward alternatives elsewhere.

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    Lifespan Financial Planning
    Last edited by a moderator: 23rd Oct, 2006
  2. will

    will New Member

    14th Sep, 2006
    I wouldnt put my cash there after seeing how the T1 and T2 shares went
    also not too happy with there services and heard of a lot more complaints
    Im no expert but just my opion...
  3. TryHard

    TryHard Well-Known Member

    17th Aug, 2005
    The dividend sounds nice, but after experiencing Telstra 'service' I could never invest in the company and sleep at night, unless I accepted it was money I was prepared to ultimately lose. Some of the technology and offerings from non-Telstra carriers and suppliers are truly amazing and I cannot for the life of me see how the 'brontosaurus' will compete effectively at that level - if they can keep a stranglhold on the infrastructure there's some hope I guess ... but a bumpy ride I reckon ? :rolleyes:
  4. PiggyBank

    PiggyBank Member

    16th Aug, 2005
    I wouldn't completely agree with your statement. Lately the gorilla has been very active in putting some bleeding edge stuff in the wireless arena and the services offered are very uptodate. Example being 850 network (Next G) was implemented really quick by industry standards. HSDPA is on its way with 14.4Mbps data rates to mobile phones in few months. Not sure though if any of these are going to translate into actual revenue and profit.

    I can understand for a retail customer the other Telco having better deals but for corporate customers where reliability and coverage are important, I don't think there is much completion.

    Disclaimer: I don't work for Telstra or any other entity involved in T3. My organisation helps Telcos around the world understand how their services gets used, once they are implemented.
  5. TryHard

    TryHard Well-Known Member

    17th Aug, 2005
    LOL PiggyBank - very freudian slip there - completion :p
  6. PiggyBank

    PiggyBank Member

    16th Aug, 2005
    :) ... Nice one tryhard. Now I know why I can't get myself to buy T3!!
  7. TryHard

    TryHard Well-Known Member

    17th Aug, 2005
    Sorry mate - I've made worse typo's - just being a smart ;)