Telstra share price: what could trigger the next growth phase?

With Telstra set to hold its Investor Day today, we examine some of the company's pre-released investor day notes.

Telstra share price: are we returning to growth?

Markets, like most things, tend to move in cycles.

Telstra's (ASX: TLS) share price has indeed ebbed and flowed in recent years, as telecommunication trends and innovations come in and out of favour.

Yet in the present, Telstra’s visionary CEO – Andy Penn – is betting big that the company could itself be on the verge of entering another ‘growth phase.’

Indeed – if there was one takeaway from today’s pre-released Telstra investor day notes – it was that.

Namely, when speaking around the patterns of the telco industry – Mr Penn said:

'Through the cycle of Gs [3, 4, 5, ect] industry handheld ARPU and revenues have general grown through the first half of the roll out, such as they did in Australia between 2011 and 2015 for 4G.'

'The good news from this is that we are about to move into the first part of the cycle again with the roll out of 5G.’

Mr Penn finished by saying that:

‘While we will continue to see industry ARPUs decline for the next 12 months or so, transacting MMC is increasing for Telstra indicating a return to ARPU growth ahead.'

Can Telstra capitalise on this first stage opportunity? Mr Penn thinks so. Indeed, that was and still is the whole point of Telstra's T22 strategy.

Investors to some degree seem to have faith in Mr Penn’s ability to execute on the grandiose T22 plan, as well.

The Telstra (ASX: TLS) share price has after all ran ahead of the broader market year-to-date, rising a shade over 30% since January. Analysts also remain bullish: according to the Wall Street Journal the consensus rating on Telstra's stock is 'overweight.'

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Financial guidance in focus

As was also revealed in the pre-relased notes today, Telstra's Chief Financial Officer – Vicki Brady – took the chance to reaffirm the company's FY20 guidance.

Speaking of the company’s expectations for the current fiscal year, it was noted:

'Consistent with our guidance, after excluding the expected in-year headwind of the nbn we expect underlying EBITDA to grow up to $500 million.'

Building on this, it was also pointed out that:

'We also expect second half performance vs pcp to be stronger than the first half, with Underlying EBITDA growth excluding nbn headwind and product trajectory, especially mobile, expected to improve in the second half of the year vs pcp.'

A more granular view of the telco’s financials will be available when Telstra reports its half-year FY20 results in February.

Watch this space.


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