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Macquarie Downgrades Telstra Despite Share Surge

Macquarie has downgraded Telstra from ‘neutral’ to ‘underperform’, despite full year earnings in line with analyst projections, and a three-month high share price.

The news follows an 8.9% drop in Telstra full-year revenue, with CEO Andy Penn warning against further “challenges” ahead.

As per The Australian Macquarie attributes the “recent run” in Telstra’s share price, coupled with the entry of TPG Telecom, NBN impacts and mounting competition for the downgrade.

“While the incremental news today was on balance positive (with) declines arrested for now in post-paid Mobile ARPU and good SIO growth, operational challenges remain, given current competition, NBN impacts and the threat of a new mobile entrant.”

As revealed yesterday, Telstra claims revamped broadband and entertainment packages will launch in October this year.

Despite the income slump, Telstra has left its guidance unchanged with EBITDA (excluding restructuring costs) to hit $8.8 billion – $9.5 billion for the year ahead.

Some commentators question whether Telstra will maintain its pledge for a 22 cent dividend, with some analysts projecting a 10 cent dividend by 2022.

Macquarie claims a drop in Telstra’s mobile revenue during the second half of the year, coincided with a revenue ramp up from rivals such as Optus and Vodafone – questioning the sustainability of short-term losses, for long-term gain.

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