Mobile player tipped to take $590m from Telecom

A new entrant into the mobile phone market could cost Telecom up to $590 million in lost earnings, a Deutsche Bank report says.

Telecom has about 47 per cent of the mobile market where it competes with the British giant Vodafone.

"We believe that favourable mobile regulation would facilitate market entry," Deutsche Bank analyst Richard Long wrote in a research report.

"The long-run earnings disruption could wipe out as much as $590 million, or 30c a share in valuation, for Telecom."

Long said the forecasts were based on a new entrant achieving about 15 per cent of the market.

Deutsche had reduced its share price target for Telecom to $4.40, from $4.95, to reflect the risk of greater competition in the mobile market, and the increased capital expenditure required by Telecom to build a next generation mobile network.

A decision by the company to build a 3G W-CDMA network could have a valuation impact of an additional 15c a share.

Telecom's share price has been under pressure since May, when the Government said it would require the company to open up its local networks - local loop unbundling - to allow competitors to offer internet services.

Its shares fell to 13-year lows this month, below $4. It has since rallied to $4.27, but it is still down about 23 per cent in value since the announcement.

- REUTERS