Are Telstra's margins safe?
Recent comments from Telstra CEO Andy Penn have caught the eye of some investors who believe the generous margins that Telstra has enjoyed may soon be eroded mirroring the recent experiences of Woolworths. According to Gaurav Sodhi from Intelligent Investor revitalised competitors in shape of Vodafone and Optus are gearing up to take aim at Telstra's outsized and flattering returns on equity (VIEW LINK). "In its results presentation this week, Telstra chief executive Andy Penn pledged to sacrifice margin for market share... Super profits have done what they always do: flatter the business for a while then promote competition." Hugh Giddy from Investors Mutual says that a comparison between what happened with Woolworths and the outlook for Telstra is flawed. Giddy says Telstra is able to achieve a price premium because there is a perception and quite probably a reality that they offer a premium service. "The problem for Woolworths is that they pushed the price lever and they tried to get a price premium for products that are very easily comparable." Watch the full interview:
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