Telstra Update - Continue to Hold

7/6/06 Telstra Update

Expected dividends .14 cents a half

Share price 6/06/06 3.82

Return 7.3% plus franking = 8.4% net return

Super fund average price 4.70 return is 5.96% or 6.85% net. Still an excellent return.

Current return = $4,000 on 10,000 shares, Net is $4,600 or a 9.8% return.

Therefore, ignoring the decline in the Telstra share price is easy when comparing the return with risk free bank return of around 5.5% pre tax or 4.78% after super tax.

The other reason is ignore the price decline is that prior to the sale of the Telstra and in competitive fairness the regulatory stance weighing on Telstra is likely to be diminished. Telstra continue to sign up more broadband users than any other Australian telco and at some stage these factors should combine to increase the share price of Telstra.

Investors must believe that Telstra will lower it’s dividend to about 11 cents a half, 22 cents annually to account for the current share price. I.e. they are pricing in a 22 cent dividend or about a 6% return.

Conclusion: Continue to hold Telstra.