Across client accounts that have selected the “Growth” Australian Equity option, we have bought Telstra (TLS), a full service domestic and international telecommunications provider of telephone exchange lines to homes and businesses, supplying local, long distance and international telephone calls and mobile telecommunications services.

We are positive on the medium-term outlook for Telstra for the following reasons:

• Continued net subscriber growth in mobile, low churn and revenue supported by increased data usage, showing resilience in the face of increased competition;
• An attractive dividend yield, which has been reset to a lower more sustainable level;
• The launch of 5G services which allows for improved latency and greater capacity, provides significant potential for growth as been the case in the past with steps in available technology;
• Efficiencies and cost reductions from the ongoing transformation program look to continue;
• Operational leverage and expanding margins in the growing network application services business; and
• A superior network and brand that provides better defence against increased mobile competition than other incumbents.

The major risks facing Telstra include the NBN rollout continues to place pressure on the fixed line business and competition in mobile from Optus and the merged Vodaphone/TPG entity. Telstra does also face substantial costs in terms of ongoing reinvestment in existing products and spend on new ventures to sustain future growth.

For more information refer to Telstra Company Snapshot.