A lot of the potential bad news that could affect Telstra shares appears to be already priced in, according to a major shareholder in the telecommunications giant.
Future Fund general manager Paul Costello told a Senate hearing yesterday that research by the fund suggested that the telco’s share price had been marked down to a level where there would appear to be “limited further downside risk”.
The federal government and Telstra have been in negotiations since September on the possible sale of part or all of Telstra’s copper cable network to the NBN Co for the $43 billion national broadband network.
“The market price would seem to be factoring in a lot of potential outcomes,” Mr Costello told the Senate budget estimates hearing. “What that exact outcome will be, I don’t know, you don’t know, nobody knows.
“But certainly, as we think about the range of potential outcomes, which to various degrees are good or bad for Telstra, it would appear a lot of the potentially bad scenarios are currently priced into the share price.”
Liberal senator Scott Ryan asked whether the ongoing uncertainty surrounding Telstra was damaging the share price. “I think that’s an uncontroversial statement, so yes, I would agree with that statement,” Mr Costello replied.
The Future Fund was set up by the Howard government to cover future superannuation liabilities of public servants.
It has a 10.9 per cent Telstra shareholding in its portfolio.
Mr Costello said Telstra’s share price had dropped 2 per cent between June and March because of the broader slump in the share market, “although not by as much as other sectors”, he said.
In the March quarter alone it had dropped 7 per cent.
Mr Costello refused to speculate on what other factors might affect the share price, since it had a mandate to sell down its Telstra shareholding.