Analysts are downgrading Telstra, despite the corporation almost doubling its first-half profit to $2.3 billion and paying a 13 cent dividend.
The stock closed on Friday at $4.73.
The apparent jump in profit was illusionary because it followed a $1.1 billion write-down in the previous first half. Revenues fell for the first time.
"We have reduced our EBIT [earnings before interest and tax] growth forecast due to the weaker revenue result," investment bank UBS said.
Credit Suisse First Boston said the first-half result was "slightly disappointing" although its low gearing and near-monopoly made it a "safe haven" investment.
But Goldman Sachs JBWere questioned the 2004 and 2005 cost-reduction target of $600 million to $800 million, as it will be chasing market share. Telstra had indicated its cost savings for the first half were $172 million while cost pressures, or the cost of chasing market share and revenue growth, were $274 million.
"Telstra's costs of chasing market share exceed its cost reductions," Goldman Sachs JBWere said.
