Who would buy shares in a Telco?

Telstra is one of the best yielding shares around, management knows there is no other reason to hold them, so effectively pump the share price with good yields.  At the current prices they are a good buy, being assured of a juicy yield, and probably 50% market share from the NBN deal, all of which makes Telstra pretty attractive short term , but long term?

It seems to me that a strategy of squeezing earnings out of an existing business model when that model is being attacked from all sides is always tough, but in a telco it is almost sure to be terminal given the rate of innovation occurring from the sidelines.

There is now a free VOIP app for iPhone, “viber”  that eliminates call costs, including international roaming which has been around for only a couple of months, but has attracted 12 million users, and expanding at net speed. On top the damage Skype must have inflicted, and will inflict into the very near future as Microsoft (presumably) sets about building cheap teleconferencing services  onto the Skype platform, traditional telcos must be in a long term world of pain as they see their markets stolen by innovators they did not see coming.

I ask again, who would buy shares in Telstra, other than as a short term strategy to get a slice of the public donation of $11 billion and short term market share.


About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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