Telecom New Zealand - Possible Upside

This report reflects the research and analysis I've performed on this company. It is provided for informational purposes only and does not constitute personalized financial advice nor an endorsement or solicitation to purchase stock in this or any other company. Please do your own due diligence or hire a financial advisor before making any investment decisions.

Telecom New Zealand research report

The company pays an attractive dividend and seeks to maintain a 75% payout ratio going forward.
Telecom is the largest company in New Zealand and one of the largest employers in the country. Their position and importance to the domestic economy gives them a competitive moat.
Historically good returns on invested capital. While 40-50% ROIC may be a thing of the past, returns of 33% are still attractive relative to the company's cost of capital.
50% market share in NZ mobile market (split with Vodafone) and 80+% in the residential fixed-line market. The company obviously controls most of the wired infrastructure and has the best 3G wireless network, allowing them to win back market share from Vodafone.
While operational separation is not ideal, the negotiations with the government appears to have yielded an agreement that will provide stability going forward and enable the company to invest with some confidence of adequate returns.
PowerTel acquisition should help reduce Australian wholesale costs and perhaps bring profitability to that segment.
Good prospects for the IT business segment.
New CEO, Paul Reynolds, is highly regarded in the industry. Reynolds has experience with operations separation as he was CEO of BT Group's wholesale division when that company went through a similar process.

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The Enlightened American

Telecom New Zealand - Possible Upside