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Will Telstra’s (ASX:TLS) Update Boost The Share Price?

Telstra Corporation Ltd (ASX:TLS) has provided the market with an update about its T22 plan. 

Telstra Corporation Ltd (ASX: TLS) has provided the market with an update about its T22 plan.

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.

What Is Telstra’s Plan?

Telstra’s T22 plan revolves around becoming more efficient, which largely refers to the fact it’s going to cut a net 8,000 jobs from its workforce over three years whilst also implementing new technology and systems. ‘Net’ would suggest more jobs are being cut, but it’s also adding others.

Today, the telco gave an update on the progress of its strategy.

Telstra’s Update

Telstra said that because it’s making such good progress with its T22 strategy that it’s going to recognise an impairment and writedown the value of its IT assets by around $500 million.

Telstra also said it was ahead of schedule with restructuring, therefore it is increasing its expected restructuring costs for FY19 by around $200 million due to bringing forward consultation on proposed job reductions from FY20 to FY19. By the end of FY19 it expects to have announced a reduction of around 6,000 roles and it’s on track for the $2.5 billion net cost saving by the end of 2022.

The telco said it expects total FY19 restructuring costs to increase from around $600 million to around $800 million. Impacted employees won’t leave until early FY20 but consultation is expected to have concluded by mid-June.

Telstra CEO Andrew Penn said: “We expect to have announced or completed approximately 75% of our direct workforce role reduction by the end of FY19.

We will continue to see role reductions as we replace our legacy systems, digitise and simplify how we work, and respond to things like declining NBN and call volumes, but if a final decision is made on the proposal announced today we expect the majority of our T22 restructure will be behind us. Overall we are on track in relation to our T22 program.”

Is Telstra A Buy?

The Telstra share price has been one of the best performers in 2019. It’s up 0.6% today and has risen 29% in the year. I don’t think it could run much further without a positive change for its earnings prospects.

It is valued at 14 times the estimated earnings for the 2020 financial year. Not bad, but I think there are better options to think about like the reliable ASX stocks in the free report below.

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