This would have to be one of the few Telstra result day releases that hasn’t caused the entire sector to reprice lower. TLS appears to have finally found a floor for earnings, with guidance for FY22 set to increase.
The specific good news is the increase in ARPU (average revenue per user) across mobiles. Whilst the NBN migration from on-net to the NBN network has been a major source of margin contraction, increased competition in mobiles has been another key driver of the sector wide derate.
Stabilisation would remove a key overhang, and bodes well for all the major mobile players. Our holding in TPG, which recently merged with Vodafone, should be a net beneficiary. Further, industry wide pricing discipline as the 5G rollout continues should mean a boost to returns, which are, we think, currently too low for all participants.
Bottom line, good, if complex, result, and portends well for our exposures via TPG.
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