Overseas investors find Telstra shares a bargain

Shaking off end-of-year gloom over the indefinite delay to the third Telstra selldown, T3, shares in Australia's number one telecom have risen 25c to $4.66, its highest level since early November.

One fund manager suggested yesterday that the share price gains followed recent hints from chief executive Dr Ziggy Switkowski that the dividend could be increased or another special dividend paid in a bid to appease investors disappointed by the T3 delay.

``Last year there was a substantial increase in the dividend followed by mixed messages on whether it would happen again," the fund manager said.

``But some in the market are suggesting Ziggy has been hinting while in California that there may be another increase.

``It's not guaranteed but it is possible."

A spokesman for Telstra was quick to dampen such speculation, saying the information was ``incorrect".

Any changes ``would be a matter for the board", he said.

Analysts said Telstra was benefiting from fresh cash hitting sharemarkets around the world. Telstra's recent decline to $4.40 had made it a more attractive investment, one said.

Much of the buying has been done by international fund managers feeling more confident about the telecom sector as analysts from the European desks of Goldman Sachs and Credit Suisse First Boston upgrade their forecasts.

``One of the biggest factors for Telstra is what international fund managers are doing in the telco sector," said retail adviser Marcus Padley, of stockbroker Tolhurst Noall. ``This isn't about retail investors."

Another analyst said: ``From a strategic perspective, Europe is saying that incumbents will do better than the wireless carriers because [the carriers] are too wrapped up with rolling out 3G.

``Then you look at Australia, which offers good total returns with dividend yields higher than overseas and the Aussie dollar expected to continue to rise. It's easy to see why investors would be attracted to Telstra."

Suggestions the stock was also helped by a bullish earnings outlook from French telecom equipment maker Alcatel were treated with scepticism.

``That upgrade is not good news for Telstra, because it means companies like Telstra are spending money on equipment," one analyst said. ``Investors don't like the idea."