Why the Telstra share price spiked on Thursday

'The proposed restructure is one of the most significant in Telstra's history and the largest corporate change since privatisation,' said Telstra's CEO Andrew Penn.

Investors bid the Telstra Corporation (TLS) share price more than 4% higher during Thursday’s morning session, after the blue-chip telco announced that it would be undertaking a significant corporate restructuring.

As part of this proposed restructure, the company said it intended to create three separate legal entities, sitting within the broader Telstra Group.

These entities include: InfraCo Fixed, set to focus on Telstra's 'passive or physical infrastructure assets'; InfraCo Towers, which would be responsible for operating and overseeing the company's 'passive or physical mobile tower assets'; and ServeCo, which, according to the company 'would own the active parts of network’, including Telstra’s all-important spectrum assets.

Commenting on this radical shakeup – which was described as a core part of Telstra’s much-hyped T22 strategy – CEO Andrew Penn said:

'The proposed restructure is one of the most significant in Telstra's history and the largest corporate change since privatisation. It will unlock value in the company, improving the returns for the company's assets and create further optionality for the future.'

Looking back, it should be noted that Telstra had already established InfraCo as a standalone business entity as part of Telstra’s T22 plan – aimed at improving operating efficiencies and creating optionality’ once the national roll-out of the NBN was complete. With InfraCo now functioning as its own standalone business, Mr Penn said 'now is the time to take the next step in realising our T22 ambitions, including monetisation of our infrastructure assets where appropriate.'

By the afternoon session Telstra drifted somewhat lower, trading to $3.10 per share (+3.51%) by 2:08PM.

Beyond the radical shakeup

Besides updating the market on the telco’s restructuring plans, Telstra also took the chance to re-confirm its previously stated FY21 guidance.

Looking back at these guidance figures, Telstra said for fiscal 2021 it expected to report total income of between $23.2-25.1 billion, earnings (EBITDA) of between $6.5-7.0 billion and capital expenditures of between $2.8-3.2 billion.

Looking further out, while Mr Penn noted that Telstra does not provide guidance more than one year out, with solid progress already being made on the rollout of its T22 strategy, it was noted that 'Telstra believed it would turn underlying EBITDA back to growth by FY22 and was very focused on delivering its ambition to be in the range of $7.5 to $8.5 billion of underlying EBITDA by FY23.’

Should the telco hit that target, it would equate to an approximate return on invested capital (ROIC) of almost 8%.

Despite this positive news, the Telstra share price has drifted lower YTD, falling around 13% since January. Yet despite that share price weakness, the blue-chip telco remains favoured amongst the sell-side – commanding an Overweight rating on average, according to the Wall Street Journal.

Telstra share price, how to trade: long or short

In the wake of this update, where do you stand: are you bullish or bearish on the telco? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Telstra using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘Telstra’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.