Telstra loses $12 billion after NBN bid failure

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Telstra has lost more than $12 billion of its market value after the news of its National Broadband Network bid was rejected by the Government on Monday. According to The Australian, Telstra lost $9 billion on Monday, and lost an additional $3 billion when its shares fell 24 cents in early trading today. Afternoon trading didn’t help Telstra, as its shares lost 13c to close at $3.52, with the ASX200 slipping nearly 1 percent.

Telstra is also set to lose its status as the “best safe haven” for investors because of the financial crisis that plagues economies around the world, including Australia, Asia, Europe and more importantly, the United States of America. Many of the analysts have been slashing their target prices, with Citi analysts slashing Telstra’s target price from $4.20 to $3.40.

Additionally, Goldman Sachs JB Were downgraded its recommendations from “buy” to “hold”, and Deutsche Bank pulled its target price from $5.30 to $5. However, Nomura analyst Sachin Gupta has not ruled out a possibility of Telstra building a similar infrastructure in Australia, telling The Australian, “Telstra is now excluded from the NBN bid. However, this does not necessarily mean Telstra will not build this infrastructure in Australia.”

“The RFP (request for proposals) process would lead to recommendations by the Expert Task Force, but the final tender could be awarded to anyone. We think Telstra is now more likely to start discussing this with the Minister on more co-operative terms – be that on returns, pricing or structure.”

Telstra was rejected from the NBN bid after failing to meet the criteria of the proposals, with its proposal being a 13 page letter saying that it wants several Government demands removed from the bid, and also wanted to use the money to upgrade its own existing network, claiming that it was the only bid that had “real financial commitment”. It has not ruled out suing the Government, but some analysts are saying that they are 100% percent certain that Telstra will go down that path.