The Telstra Corporation Ltd
(ASX: TLS) share price has fallen in early reaction to some released NBN news.
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.
Telstra’s New NBN News
The telco has released its FY20 guidance for the NBN Co’s Corporate Plan 2020.
Telstra had assumed that the NBN rollout and migration in FY20 would be broadly in line with the 2019 plan.
NBN Co has provided updated information regarding its outlook for 2020, which includes a reduction in the total number of premises forecast to be connected during FY20 from 2 million to 1.5 million.
Sadly, this change materially impacts the guidance Telstra provided for total income, underlying EBITDA (click here to learn what EBITDA means) and other financial statistics.
This NBN change has also led Telstra to alter its FY20 cost reduction target from $660 million to $630 million.
FY20 guidance for total income is lower by $0.4 billion to a range of $25.3 billion to $27.3 billion, FY20 underlying EBITDA is expected to be $0.1 billion higher in a range of $7.4 billion to $7.9 billion and free cashflow after operating lease payments is now expected to be $0.1 lower at $3.3 billion to $3.8 billion.
Due to these changes, Telstra no longer thinks FY20 will be the peak NBN headwind year, instead FY21 is now believed to be the worst year.
However, excluding NBN headwinds, underlying EBITDA is still expected to grow by $500 million in FY20.
Is The Telstra Share Price A Buy?
Telstra’s share price has been a strong performer over the past year, but I’m not inclined to think it’s worth buying at the moment. The NBN continues to be troublesome for revenue, profit and dividends – and there’s no end in sight.
We still know very little about how good 5G will be for Telstra’s finances. even if it unlocks new technology. I think there are plenty of ideas for better earnings growth at better prices. I’m thinking of shares like the ones in the free report below.
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