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Telstra shares up on possible InfraCo spin off

Sebastian Bowen

Shares of Telstra Corporation Ltd (ASX: TLS) are up another 3.5% today, sitting at $3.84 at the time of writing – which is Telstra’s highest share price in over 3 months.

A slew of good news has gotten investors interested in the nation’s biggest telco. News that the nbn will be altering its pricing mechanisms yesterday should ensure Telstra (along with the other telcos) gets a bigger slice of the nbn profits going forward.

Telstra also released some updates guidance at an investor conference yesterday as well. Telstra expects its ‘T22’ cost cutting program to continue to deliver for the company – with the program already delivering $1.17 billion in cost reductions and an expected $2.5 billion to be achieved by 2022.

What about InfraCo?

But it’s Telstra’s infrastructure plans that have gotten investors riled up today, it seems. According to reporting in the Australian Financial Review, Telstra is planning on transferring all of its mobile infrastructure into its infrastructure arm InfraCo, which is now a semi-autonomous business within Telstra.

Speculation has been building that Telstra is considering an InfraCo spin-off sometime in the future, perhaps in conjunction with buying the nbn network back off the government.

Whatever Telstra’s plans are, it’s clear shareholders have been giving these new developments a big tick.

Telstra’s infrastructure assets are highly lucrative for the company as mobile and internet products are now core, highly inelastic services essential to the operation of the economy. Both households and businesses will be utilising them at all points of the business cycle, which gives these assets a high level of cash flow certainty.

Foolish takeaway

The fact that Telstra is clearly trying to leverage maximum benefits from these infrastructure assets bodes well for shareholders. It’s clear that the painful transformation that CEO Andy Penn has undertaken is starting to pay dividends (literally) for the company, and I think there is more upside potential than downside for Telstra from here on out.

The post Telstra shares up on possible InfraCo spin off appeared first on Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019