In late morning trade the Telstra Corporation Ltd (ASX: TLS) share price is marginally higher at $3.57 on the day of its annual general meeting.
Here are a few key takeaways from the AGM:
- Last year over 5000 petabytes of data travelled over Telstra's fixed and mobile networks each day, a 40% increase year-on-year.
- Telstra has a 52% share of the NBN market, but competes with 180 resellers.
- The company sees TPG Telecom Ltd (ASX: TPM) as a formidable competitor in the mobile market.
- Reaffirmed that its total dividend in FY 2018 is expected to be 22 cents per share, fully franked.
- Aims to grow the business by delivering better customer experiences, driving further value from its core business, and by building new growth businesses close to its core.
Overall I felt today's AGM speech from Chairman John Mullen was both honest and encouraging. I agree with his view that although Telstra is facing huge challenges, the company has the talent, resources, and know-how to prosper.
As mentioned above, the company has a plan in place to attempt to offset the $3 billion gap in its earnings that it will face when the NBN rollout is complete.
Each day the company handles 135,000 calls to its customer services team. If these can be cut down significantly through self-serve options, then there certainly is a huge opportunity for the company to reduce its costs significantly.
Its current productivity program has already taken $250 million of underlying core fixed cost out of the business this year and is on track to deliver $1.5 billion of annual savings.
In terms of growth, as well as its core business, management believes that the arrival of 5G internet will create growth opportunities in untapped areas such as driverless cars, drones, connected homes, artificial Intelligence, machine learning, smart cities, and smart agriculture.
This market is estimated to be worth up to $5 billion in five years and I believe Telstra and its world-class network is in pole position to profit from it.
Should you invest?
While it will undoubtedly take time for Telstra to profit from its new growth opportunities, I believe that its new dividend policy will allow it to at least maintain its 22 cents per share dividend for the next three years.
Because of this yield, I think Telstra could be well worth considering as an investment for income investors. After all, with its shares down sharply this year, I feel there is far more upside potential than downside risk at the current share price.
