Telstra Corporation Ltd (ASX: TLS) has a secret plan to create $1.5 billion of value for shareholders by using property.
Telstra is our country’s oldest telecommunications business, having built the first telegraph line in 1854. In 2019, it provides more than 17 million retail mobile services, around 5 million retail fixed voice services (e.g. home phones) and 3.6 million broadband services. Telstra also has operations in eHealth, network applications and subsea cabling. In 1997 (until 2006), the Government sold Telstra to Australian investors by listing the shares on the ASX. The second batch of Government share sales, called “T2”, was conducted in 1999 at $7.40 per share.
The Secret Telstra Property Plan
Telstra owns a nationwide network of telecommunication exchange properties, but it is looking to create an unlisted property trust and sell 49% of that trust to real estate investors, according to the Australian Financial Review’s Street Talk.
If Telstra can find a buyer, or buyers, for the stake then it could raise up to $1.5 billion for the telco.
There are 37 of these telecommunication exchange properties that would be included in the trust, all of them are based either in capital cities or large population hubs.
Street Talk revealed that the property portfolio would have a weighted average lease expiry (WALE) of 21 years. Telstra would still be responsible for all of the ongoing expenses, repairs, maintenance and capital expenditure.
If the trust were to be created, there would be multiple options for lease extensions. Two of the potential real estate investors that UBS, Telstra’s adviser, has approached are Charter Hall Group (ASX: CHC) and ISPT (a property investor operated by multiple industry funds like AustralianSuper, Cbus and HESTA).
UBS is also pitching the potential property trust to overseas investors, although Australian investors would make the most logical sense with more knowledge of Telstra and the lower RBA interest rate compared to the US Federal Reserve.
Is This Good News For Telstra?
I think it’s a smart plan by Telstra to unlock cash which can be used for more important matters like investing for 5G.
However, an extra $1.5 billion of cash would not alter the significant challenges that Telstra is facing with the NBN and competitive mobile plans.
I would much rather buy shares of the great ASX businesses revealed in the free report below.
3 Proven And Reliable ASX Shares
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