Why the Telstra (TLS) share price has jumped today

Posted: 30 June 2021 12:21 pm
News
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Shares in the telecoms operator have climbed 21% over the last 6 months.

Shares in Australia’s biggest telecoms operator Telstra (ASX: TLS) are among the most widely held stocks in the country. The shares were among the most traded on the ASX on Wednesday, jumping 4.3% to $3.76 at the time of writing.

What's pushing up the Telstra stock price?

Telstra announced on Wednesday the sale of 49% of its towers business for $2.8 billion.

The deal, with a consortium including the Future Fund, Commonwealth Superannuation Corporation and Sunsuper, means Telstra will retain just 51% in its InfraCo Towers business, which owns 8,200 towers across the country.

Telstra has previously flagged its plans to auction off its towers business before the end of the year as part of a significant restructuring, but the deal comes much earlier than expected in a boost for the company.

Telstra will use the proceeds to pay down debt and also use $75 million for expanding connectivity in regional Australia.

But in a significant boost for investors, the company said it will return 50% of the net proceeds to shareholders by way of a possible share buyback.

The company will provide further details at the time of its full-year results in August.

Compelling rationale

Telstra CEO Andrew Penn said the consortium provided a compelling rationale for the deal.

“We were approached by the consortium earlier in the year as they recognised the value of these assets and provided a compelling rationale to progress the transaction ahead of schedule,” he said in a statement.

“We believe the value of the transaction; the high calibre consortium members and the terms of the agreement which protect Telstra’s network differentiation, support our decision to accelerate the process.”

Telstra announced in March it would split into 4 divisions and form a new holding company, allowing it to better monetise its infrastructure assets amid a major restructure program.

The company is also in the midst of a cost-cutting program and will axe up to 2,000 jobs this year in a bid to boost its financial performance. Analysts see an improved outlook due to the success of its T22 strategy and a leadership position in 5G.

On Wednesday, Goldman Sachs also lifted its 12-month price target on the Telstra stock to $4.20 a share. Telstra shares have jumped 21% over the last 6 months.

Think Telstra shares are a buy?

If you are looking to buy Telstra shares, consider investing through an online share trading platform.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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