Crikey was a lone voice sticking the boot into the Howard Government in December for costing taxpayers billions by deciding to almost double the size of T3 just before a major surge in the stockmarket, telco stocks generally and sentiment towards Sol Trujillo’s five year transformation plan.

Late last year, T3 investors had made a quickfire $3 billion or 35% profit. When the instalment receipts hit a new high of $3.14 this morning after yesterday’s better than expected Telstra earnings report, that profit had reached a staggering $4.9 billion or 57%. Never before has so much been made by so many so quickly when dealing with an Australian government of any persuasion.

And after three years of dithering, we’ve now got the prospect of the Future Fund starting its $40 billion investment plunge right at the very top of a ridiculous sharemarket bubble.

If the Howard Government has ploughed an extra $5 billion a year into its super funds from the moment it got elected – rather than allowing unfunded liabilities to blow out by $29 billion to $98 billion over its first decade in office – taxpayers would be tens of billions of dollars better off today. Now we face big risks converting cash into equities after the biggest bull run in history.

All this rubbish about not being able to flog Telstra in an election year has also cost taxpayers many billions. The jury was still well and truly out on Sol Trujillo when the Government decided T3 should be doubled from 2.15 billion shares to 4.3 billion last November. Now the market has warmed to the plan after the horse has well and truly bolted for taxpayers.

While it would be too much to expect the Howard Government to admit it blundered in the timing and scale of T3, a number of leading telco analysts are also starting to eat their words on Telstra after yesterday’s upbeat profit and news the rich 28c a share dividend would probably continue for at least the next two years.

This is how T3 spruiker Goldman Sachs JB Were greeted yesterday’s profit and 17c share surge:

We have clearly missed Telstra’s recent rerating. Does today’s result justify a change in our view? There were a number of positives in the result (eg, excellent performance in mobiles and broadband, better than expected PSTN, confirmation the transformation remains on track). However, we feel these are more than priced in at current levels, and we are reluctant to “chase the price”. While yield is likely to provide ongoing short-term support (particularly TLSCA), we cannot justify a neutral view at these prices.

And from Citigroup yesterday, a bear on the company with a pre-results valuation of $3.62:

Acquisitions and zero margin products helped deliver a headline 2% growth. The stock remains a relative portfolio call in a heady market with fundamentals not supporting current levels. Our target price increases to $3.90 and we retain our Sell, Medium Risk rating.

Ah, where’s the sorry to any clients to took your valuation and “sell” at face value?

According to a story in The Australian last October, “The nine brokers participating in the retail component of the T3 float are: ABN Amro Morgans (which has a “hold” recommendation on Telstra); Goldman Sachs JB Were (“hold”); UBS Wealth Management (“neutral”); Bell Potter (“hold”); Shaw Stockbroking (“hold”); CommSec (“reduce”); Ord Minnett (“Neutral”) and Citigroup Wealth Advisers (“sell”).

There should be a lot of red faces in the analyst and broking community today. Just saying sorry would be a start.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey