Telecom shares closed at a 16-month low last night, shaken by a cocktail of shaky global investor confidence and news of Telstra's huge writedown in its Asian investment, Reach.
Yesterday the company's shares fell 3.6 per cent to $4.24. The last time Telecom hit that level wasin October 2001, following the September 11 attacks, when the shares touched $4.21.
But no such calamity is behind this drop, just a new blast of investor pessimism that has had telco stocks tumbling worldwide.
While Telstra shook the market with last week's writedown of the Reach undersea cable venture it shares with Hong Kong's PCCW, analysts say issues on a more global scale are to blame.
"It's negative sentiment towards the telco sector globally that remains a key driver of Telecom's share price," said Forsyth Barr analyst Jeremy Simpson.
Telstra and PCCW cut the value of Reach by US$1.55 billion ($2.73 billion), a move that will hit Telstra with a US$546 million charge against its first-half earnings.
JBWere analyst Andrew White said Telecom's investment in the Southern Cross cable - a high-capacity fibre link connecting New Zealand with Australia and the US - had a US$60 million loan exposure, which made it low risk compared with Reach.
"It's more global jitters than implications of Reach," he said.
Telecom's head of corporate affairs, Philip King, said several factors meant Telstra's costly experience with Reach would not be repeated with Southern Cross Cable.
"Southern Cross has zero equity value on our books. Reach is a wholesale carrier, whereas Southern Cross is an asset owner, it's not a carrier as such. Reach also has significant debt levels."
Telecom had fallen, but not as far as other operators.
Its share value had fallen 7.6 per cent in the last month but Telstra had fallen 11 per cent, Deutsche Telekom and France Telecom around 12 per cent, British Telecom 9 per cent and US operator SBC had dropped 15 per cent.
