Investors have long been attracted to Telstra Corporation Ltd (ASX: TLS) for its dividend and the security of its earnings, which are underpinned by a nationwide network of cell towers and data cables.
However, shares have recently declined following investor disappointment with the lack of a buyback at the latest annual report. The recent decision by the Australian Competition and Consumer Commission to reduce access prices (that Telstra charges competitors for using its network) by 9.4% also hurt shares, which are down 14% in the past six months.
This represents a decent opportunity to long-term investors. In the investing world you would be hard-pressed to find someone that doesn't think the future is going to increasingly involve technology.
More technology is coming, bigger, smaller, faster, lighter, smarter, all of which will require an enormous and growing amount of data.
As a result, Telstra has multiple exciting futures with its investment in machine-to-machine (M2M) technology, expansion into Asia, and development of new mobile broadband technology with speeds of up to 600 Megabits per second – faster than the National Broadband Network (NBN).
But what about the bad old days?
Many investors recall when the government offered Telstra in tranches, which left a significant number of buyers – who paid up to $7.40 per share – sitting underwater on their investment. At the time of privatisation many customers felt the company was also inefficient and difficult to deal with.
So while older investors who remember the pre-privatisation and issue tranche days of Telstra may be wary, in truth the company has undergone a complete transformation. Furthermore, it has subsequently built a track record of successful investment overseas (such as Hong Kong mobile business CSL which it sold for a huge profit) and I believe investors can have confidence in the company's future.
With a decent balance sheet, great cash flows and a solid 5.9%, fully franked dividend, I believe that Telstra shares are starting to look attractive today.
