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Telecom New Zealand: Bull or Bear?

Every trade has a buyer and seller taking opposite sides. They often have different risk tolerances, time horizons, and beliefs about the direction of a stock. And before purchasing any stock, investors should build a good bull case that refutes the bear case. In that spirit, I’ll spend the next few paragraphs making both a bullish and a bearish case for Telecom New Zealand (NYSE: NZT – News), and I’ll let the reader decide which argument is more convincing.

Government Goes Medieval on Telecom New Zealand

A political risk is present in shares of any government-regulated company, but it came to fruition for Telecom New Zealand (NYSE: NZT) when the New Zealand government unbundled the local loop. Unbundling a local loop is a fancy phrase for requiring an incumbent telecom provider to open its networks to competition at cost. But maybe, just maybe, it created a very unique buying opportunity for Telecom New Zealand’s shares.