The Telstra (big teleco operator) result is out.

The result disappointed, at the margin, with guidance being narrowed at the upper end as NAS falls off a cliff. But mobiles remains the jewel in the crown.

The legacy stuff is close to done (this is the fixed voice items in consumer and small business, you can see the fixed legacy voice quite clearly in the top right of the below graph).

ARPU’s (average revenue per user) are growing…

and whilst I’ve no real idea how cyclical the NAS stuff is (lots of mgmt blaming the macro backdrop, citing weak confidence to explain the big declines in customer activity in December etc) it’s not big enough at the EBITDA level to hurt much anymore.

Operating costs were very well maintained, essentially flat, such that even small revenue gains (good mobile, bad NAS) resulted in NPAT growth.

Which you can see below. Growing from a new base, as the NBN impacts are mostly done.

A key issue has been returns, specifically making sure that TLS get a good return on the capex associated with 5G (spectrum payments, towers etc). With ARPU’s rising and a more rational industry structure, this looks set to continue.

Cashflows are sound…

…and gearing is reasonable.

For a PE of around 20x we think this a desireable set of attributes.

Particularly if the economy is set to weaken, which based on retail sales and employment data, appears likely. TLS should grow, modestly, given population growth, and spits out a solid dividend yield.

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