The outcast has returned from the deserts of market disaffection. Telstra is back, and the market has a new darling: David Thodey.
The pundits were effusive. Finally, next year, Telstra’s earnings would rise instead of fall. Thodey’s plan to chase market share in mobile phones had been vindicated by Thursday’s profit result. Both Telstra and its arch rival Optus had robbed Vodafone, and all its black spots, of its market share.
The big number in the deluge of figures was Telstra’s 1.6 million new mobile connections, which were not all new customers but new SIM cards, indicating a trend towards people using more than one SIM.
On the costs’ front, the telco – in its post-amigos epoch – had struck $600 million in productivity gains.
Sometimes the market is too much about expectations and not enough about reality. Analysts had been tipping earnings to fall by between 8 per cent and 9 per cent but they fell by only 6 per cent. Market expectations had successfully been beaten and the stock shot up accordingly.
On further broker upgrades yesterday it broke through the $3 barrier – a threshold that, once upon a time, few would have thought it would fall beneath in the first place.
And why should it not rally? Telstra was yielding almost 9.7 per cent; had buckets of cash coming from the NBN deal, and – but for the fact that it didn’t have its own army and printing press – would be more creditworthy than the US government.
Mobiles are where it’s at. While mobile devices played a vital role in fomenting the revolutions of the Arab Spring, in the Lucky Country we have our own mobile revolution afoot: mobile gambling.
Hark! As democracy flowers in the Middle East we already aspire to a post-democratic nirvana, a freedom far more precious than the right to vote: the freedom to gamble on the move.
It is a hard-won liberty, spawned not only from technological advances but from years of struggle by the indefatigable lobbyists for, and executives of, the big gaming companies. We don’t having protesting youths roaming the streets. Rather, we have prowling lobbyists roaming Parliament’s passageways.
Yes, our gleaming reputation for being at the vanguard of global achievement was on display again this week. A study by H2 Gambling Capital showing Australians as the world’s No.1 losers was trumpeted by CNBC .
“They [the report’s authors] take into account average gaming losses (the amount bet and never recovered) in a year, divided by the adult population in over 200 countries. The numbers include money lost on all types of betting, including horse racing, poker machines, lotteries and casinos during 2010.”
And we won! Australia may no longer be the best-rated cricket team in the world, but when it comes to having a little flutter we are the world’s biggest losers.
The industry can be proud of its efforts, having driven relentless concessions from governments of both colours. Howard, Rudd, Gillard: no significant setbacks. Quite the contrary, in fact.
Victoria had a record month of gambling revenue in December 2009, the very month funds were disbursed under the government’s first $10 billion economic stimulus package.
Naysayers take note. The cash splash did stimulate industry via consumer spending!
It was a remarkable week again on world markets. Despite inflation, the cash markets have well and truly factored in a fall in interest rates. Thanks to the financial crisis and slowing growth, traders are now betting on a cut of at least half a per cent by Christmas.
On the corporate front, the Commonwealth “Times Are Tough” Bank handed down Australia’s biggest profit ever, a bell-ringing $6.8 billion beauty, replete with fatter margins. Once again, the flip side of the success in banking was put in stark relief by the travails of retailers and manufacturers.
David Jones’s sales results, down by 10 per cent and with little relief in sight, were a further suggestion of the structural challenge from internet shopping, besides the general malaise in spending.
And the agonising demise of manufacturing was no more evident than in admissions by Bluescope Steel, which announced writedowns and foreshadowed a menacing “restructure”. Observers took this to mean a possible closure of one of the blast furnaces at Port Kembla. These are historic operations, employing thousands of workers.
Bluescope was spun out of BHP in 2002. The pre-eminent steelmaker has been sadly laid low in recent years by the confluence of a rising dollar hitting its export revenues and rampant coking-coal and iron-ore input prices driving up its costs.
All this, happening against the backdrop of listless domestic demand for steel, has left the share price wallowing at less than $1.
Meanwhile, on the world stage the US Federal Reserve was shaping the future, under the usual slapdash scrutiny of its fawning acolytes in the media and markets.
And the future is … exceedingly liquid. The penny still doesn’t appear to have dropped about quantitative easing (QE, or money printing) and what it means for the world.
The Fed’s explicit policy is more of the same: zero interest rates for two years. Besides this Harvey Norman 24-months’ interest-free approach, the implicit message is more QE.
The point of this quantitative easing is to debase the currency, thereby radically reducing the value of the US’s debt.
What this means is the Fed props up Wall Street with endless liquidity, fuelling stockmarkets while the US exports its inflation to the rest of the world and debases everyone else’s asset values.
On a cynical view of it, we all have to work for the same cash governments are printing, and devaluing.