Dealing with this asset falls somewhere between a thought bubble and a closed deal. This is the company that could potentially buy or get a stake in the National Broadband Network – in case the government sells it about five years later.
Andy Penn knows the rewards are rich when he does this corporate overhaul.
How Telstra ultimately handles Infraco Fixed needs to consider the potential for buying or controlling NBN. So, structurally, it needs to be structurally pretty broadly separated from the body of Telstra – the company that sells cellular and broadband to consumers and businesses.
It also needs to get buy-in from the government and the NBN, as well as regulators and potential investors.
There are several ways to do this. For example, Telstra InfraCo Fixed doesn’t have to sell as a whole company. Inside there are assets that could be shaved and sold separately.
In the meantime, Telstra is well on its way to doing something with its smaller infrastructure business, which owns its mobile towers.
Called InfraCo Towers, it’s a slightly smaller hidden gem – but it’s still valued at $ 4.5 billion – and is again listed in Telstra’s books at a fraction of that value.
In theory, selling this asset should be less complicated from a regulatory perspective. However, it is very likely that Telstra will list this Infraco Tower business by selling a small stake to outside investors.
The sell-off also coincides with rival Optus’ plans to sell its mobile towers. Optus owns fewer towers but has selected better locations in its portfolio.
Nothing will happen until the end of next year, so Thursday’s announcement provided slightly more detailed information on where Telstra’s strategic roadmap should lead.
But it was enough to keep investors’ minds focused.
And that wasn’t the only good news for long-suffering Telstra shareholders who have endured the NBN’s financial headwinds for years. Based on the updated expectations, the underlying earnings will revive in the second half of 2021 – even if earnings for the full year will still be in decline.
Management is now clearly confident that the various strategies it is using to return to earnings growth will succeed. Part of that is the growth brought about by the lead in 5G. Improved margin in the fixed line broadband business will help, and higher average revenue per user is another part.
Achieving profit targets this year and through 2023 will also depend heavily on achieving the cost-cutting targets.
Telstra aims to deviate from its guidance for fiscal year 2021 for earnings before amortization of interest taxes, depreciation and amortization of between $ 6.5 billion and $ 7 billion to achieve EBITDA of $ 7.5 billion to $ 8.5 billion in fiscal year 2023 to achieve. This would achieve the magic target of 8 percent for the return on invested capital.
And more importantly to shareholders, it would sign up for Telstra’s ability to keep dividends at current levels.
Elizabeth Knight is a commentator on businesses, markets and the economy.
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