HANGING UP ON TELSTRA SHARES

LONG- SUFFERING Telstra shareholders should rethink their investment as the communications giant is battered on financial markets.

More than 1.4 million shareholders — many of them mums and dads who bought into Telstra through government floats — have watched their shares sink 36 per cent in value and their dividends drop.

This week’s mobile network outage did not help, and while forecasters predict more pain, some believe it may soon be a buying opportunity.

Telstra’s share price has more than halved in three years and its current price below $2.90 is worse than what people paid when it launched in 1997 at $3.30 a share.

“This is Australia’s most widely held stock and a lot of people have been burnt badly,” said CMC Markets and Stockbroking chief market strategist Michael McCarthy.

“A lot of investors would say I have been hit so hard there’s no point selling now, but the prospects for Telstra remain very grim.”

Its annual dividend has dropped from 31c to 22c in the past year, and analysts say it could go below 15c soon.

Mr McCarthy said Telstra would find it hard to grow because it already was the “big beast in the jungle”.

He said people should make investment decisions based on their circumstances but “there’s no reason to continue to own Telstra stock”.

Telstra’s problems have included intensifying competition and the impact of the national broadband network.

Wealth Within chief analyst Dale Gilham said it still controlled most of Australia’s telecommunications industry and was not going away.

“Over 20 years all I kept saying to people was, ‘why are you holding Telstra?’ They said, ‘dividend yield’, and I said, ‘why, when you are losing so much money?’ ” Mr Gilham said.

He said he liked Telstra as an investment now, because people were growing tired of the stock and selling out.

“Usually when mums and dads start doing that, that’s when it’s going to go up,” he said.

Investment funds were also selling, he said, and waiting for it to bottom out before accumulating again. “It’s still a little early to get in, but I would say in the next month or two it will start to move up,” he said.