Here’s what you need to know about this telco giant’s new T25 strategy…
The post Telstra (ASX:TLS) share price on watch after unveiling its T25 strategy appeared first on The Motley Fool Australia. –
The Telstra Corporation Ltd (ASX: TLS) share price will be one to watch on Thursday.
This follows the release of its highly anticipated Strategy for the Future investor day update this morning.
What did Telstra announce?
With the very successful T22 strategy drawing to a close next year, the telco giant isn’t resting on its laurels.
This morning Telstra has unveiled the T25 strategy that it believes will take the company forward.
According to the release, commencing on 1 July 2022, T25 will be built on four strategic pillars. These are aiming to deliver an exceptional customer experience, leading network and technology solutions that deliver the future, sustained growth and value for shareholders, and the place you want to work.
Telstra’s CEO, Andrew Penn, highlighted that T22 was based on transforming the company, whereas T25 will be about driving growth.
He commented: “T22 has been one of the largest, fastest and most ambitious transformations of a telco globally and today we are a vastly different company. This means we are poised for growth as our society and economy increasingly digitises and we all work, study, transact and get our entertainment online. These fundamental shifts, together with T25, will underpin our future growth and shareholder value.”
“If T22 was a strategy of necessity, T25 is a strategy for growth,” said Mr Penn.
What is included in T25?
The company notes that T25 aims to provide a range of benefits.
This includes consumer and small business customers receiving exceptional customer experiences as telco, energy, and tech products and services are personalised and localised for individual customers using predictive analysis.
In addition, enterprise customers will have access to Australia’s largest one-stop-service shop, providing a range of managed and consulting services, telco products, and inhouse expertise of Telstra Purple to help customers digitally transform and grow.
The company isn’t forgetting about its regional customers. It intends to expand its regional coverage by 100,000 sq km of new 4G and 5G coverage, extending its network reach even further.
What about shareholders?
The good news for shareholders and the Telstra share price is that the company also has some bold growth targets.
Telstra revealed that it will aim for sustained growth and value by targeting mid-single digit underlying EBITDA and high-teens underlying earnings per share compound annual growth rates (CAGR) from FY21 to FY25.
T25 also aims to deliver $500 million of net cost reductions, cash conversion and generation, active portfolio management, and shareholder value through an updated capital management framework.
This is expected to support its dividend payments and even allow for a long-awaited dividend increase in the future.
It commented: “Telstra’s updated capital management framework, effective from today, includes principles to maximise fully-franked dividends and seek to grow them over time, to invest for growth and to return excess cash to shareholders.”
From transformation to growth
Mr Penn concluded by reiterating that T25 marks its transition from transformation to growth.
He commented: “Through T22 we have set the foundation for our future success. We have simplified our operations and products, improved customer experience and reduced our cost base and our InfraCo plans are well progressed, helping us deliver value to shareholders. While T22 has been a success, we have more to do. We are determined to finish the job.”
“Today’s announcement of T25 marks our transition from transformation to growth, from a strategy we had to do, to a strategy we want to do to focus on growth. It is a strategy that builds on the strong foundations we have built over the last three years and remains focussed on what matters most – our customers, our people, our shareholders and on supporting the creation of a vibrant digital economy for Australia,” he added.
Is the Telstra share price in the buy zone?
According to a note out of Goldman Sachs this week, its analysts believe the Telstra share price is good value.
The broker has a buy rating and $4.40 price target on its shares. As a comparison, the Telstra share price is current fetching $3.93. This suggests there is almost 12% upside for the company’s shares.
Should you invest $1,000 in Telstra right now?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.