However, it doesn t make sense to sell profitable companies with dominant market positions at these levels. While this knock-on effect cannot be avoided, investors can take comfort that TEL did not spend the vast sums on 3G spectrum rights that its counterparts overseas have. Although competitors are nibbling away at many of its profitable businesses, TEL is still making plenty of money and has suburb cash flows. Its equity ratio is still low, although a recent share issue has improved the situation a little. It still has a way to go in becoming an international company rather than a domestic telephone company but at least it has made a start and success in its efforts cannot be ruled out.
Telecom makes some moves.
TEL says it has identified mobile radio communications as a non-core business, which makes it hard to fathom why it wants to own part of such a business. The deal will take assets and staff off TEL s balance sheet and possibly free up management time for more promising activities. This could easily be as prosperous as the Southern Cross cable that TEL partly owns. Telecom lifts profit. TEL has benefited from Southern Cross Cable starting to produce earnings, keeping a lid on costs and a bit of organic growth on both sides of the Tasman.