The Telstra Group Ltd (ASX: TLS) share price is under the spotlight after the telco announced its Connected Future 30 strategy.
Telstra’s Connected Future 30 strategy
The goal of this strategy is to leverage its leadership in mobiles and digital infrastructure, step up its focus on cost discipline and efficiency across the business and deliver “consistent growth and value for shareholders”.
Telstra believes we’re at another inflection point as technology and connectivity transform again. The telco pointed out there’s “no version of the future that doesn’t rely on technology, and it all needs to be connected”.
This strategy is for the whole of Telstra, with each part of the business aiming to help Telstra be the number one choice for connectivity in Australia.
The goals
Telstra has a few different goals, which could all help the Telstra share price over time in some way, in my opinion.
First, on customer engagement, its target is to grow its (‘strategic’) net promoter score (NPS) – a measure of how satisfied customers are – by more than 50% by FY30 and consistently be among the top 10 strongest brands in Australia.
Second, it has a goal for its network to be the clear leader and it wants to “reinvent” how it captures value from it. It has developed a network experience index based on the network availability and speed experienced by mobile and fixed customers. It wants to lift this by 1 point each year to FY30.
Third, Telstra wants to be Australia’s leading digital infrastructure provider and achieve sustained cash EBIT growth to FY30 and an internal rate of return (IRR) on strategic investments and partnerships.
Telstra then said it was four ‘enablers’ that will underpin this strategy.
It wants to be in the top 25% of companies globally for employee engagement, it wants to be in the top 25% of global enterprises in AI maturity by FY30 and it wants to reduce its scope 1 and 2 emissions by 70% by 2030.
The final enabler is financial discipline. It wants to deliver rising profit margins as a core driver of growth, with underlying income growing faster than costs and business as usual (BAU) capital expenditure each year to FY30.
Shareholder value creation
It wants to deliver resilient, predictable and consistent growth in shareholder value and returns. It aims to achieve that through a combination of mid-single digit compound annual growth in cash earnings to FY30, as well as a sustainable “and growing” dividend.
Telstra is also targeting an underlying return on invested capital (ROIC) of 10% by FY30, which is above its cost of capital and up from around 8% currently.
It also wants to maintain a strong balance sheet and settings consistent with an A band credit rating.
Due to the quality and resilience of its cashflow, it has updated its debt servicing comfort zone from a range of between 1.5x to 2x, to between 1.75x to 2.25x
It also noted its franking balance may be “tight, so it may consider partially franked dividends if paying fully franked dividends is not possible.
I think rising profits, dividends and a pleasing performance for other metrics is a good idea. In the long-term, I’m optimistic on the Telstra share price and its cash payouts, I think it’s one of the leading large ASX dividend shares.
