KEY POINTS:
Sharebrokers have cast their wary eyes over Telecom, with some downgrading the share after its disappointing half-year result on Friday.
One of the downgrading brokers - Citigroup - said that chief executive Paul Reynolds had only started in the second quarter and could not be blamed for the
results to December 31.
But the market is in a vacuum with plenty of bad news as Telecom's structural separation looms on March 31.
Analysts said there was very little offered on Friday to show a turnaround at the company.
These are to be laid out at a meeting with investors in Sydney on April 10.
Last Friday, Reynolds said Telecom financials would get worse in the third quarter before improving in the fourth. But analysts warned that the effects from less mobile and broadband revenue could effect the 2009 or even the 2010 financial year.
Citigroup moved its recommendation from "buy" and a target price of $5 to "hold" and a target of $4.
Citigroup warned about a series of risks preparing for restructuring into three divisions - network, wholesale and retail - on March 31.
JP Morgan moved from a recommendation of "overweight" or "buy" to one of neutral. Citigroup analysts reduced the target price noting the company's poor revenue and market share for the first half of 2008 in mobile that would mean extra costs to keep customers and retain momentum.
Cost blow-outs for labour and regulation were unlikely to be reversed in the next 12 months.
Telecom had said that one of the reasons for the poor retail performance was because of a "landgrab" by Vodafone, offering bundled services at uneconomic rates to pick up business, but these were no longer being offered.
But Citigroup said the danger was that the cheap deals would continue.
ABN Amro Equities analysts Ian Martin and Geoff Zame issued a note setting the target price of $4.03 saying it was unclear whether falls in revenue from mobile and broadband would recover by the 2009 financial year.
There was worse to come for New Zealand operations and ABN Amro were worried about the erosion from fixed line revenue, they said.
The big question was whether the year to June 30, 2008 marked the bottom or whether it would extend in 2009 or 2010
Foryth Barr analyst Guy Hallwright was more upbeat maintaining a recommendation to "buy" the stock - which he valued at $4.68 - but said that he had brought an element of "shade" to the share after Friday's result.
While the company had said results for the third quarter would be worse, this was partly because of the timing for Easter - which is a poor time for revenue - which is usually in the fourth quarter but occurred in the third this year.
Telecom shares closed at $3.95 - unchanged from Friday when they tumbled by 15 cents.
BUY, SELL OR HOLD?
Citigroup
Recommendation - Hold
Target price - $4.03
Credit Suisse
Recommendation - Underperf.
Target price - $4.40
Deutsche Bank
Recommendation - Hold
Target price - $4.25
Forsyth Barr
Recommendation - Buy
