Could a restructure spell a new era for the Telstra (ASX:TLS) share price?

The Telstra Corporation Ltd (ASX: TLS) share price has struggled to deliver shareholder value. Could this restructure turn a new leaf?

| More on:
telstra share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Telstra Corporation Ltd (ASX: TLS) share price is struggling to deliver shareholder value. This has been the case for the past five to six years. The earnings landscape for Telstra has become increasingly challenging. For example, the government's NBN Co running home internet connectivity, emerging internet-based technologies, and rising competition have all diminished the company's blue-chip status. 

Telstra is trying to turn a new page with a proposed legal restructure that it expects to be completed by this December. 

Is the restructure a good or bad thing? 

Brokers are largely positive on the news that Telstra will create separate subsidiaries. These will include InfraCo Fixed (physical network infrastructure assets), InfraCo Towers (physical mobile tower assets), and also ServeCo (customer service and products) and Telstra international. 

On 23 March, Goldman Sachs eyed potential asset monetisation. This gives the broker greater confidence that its infrastructure value will ultimately be realised by the market. The broker is bullish on the restructure with a $4.00 12-month target price. Specifically, representing an upside of ~20% at today's prices. 

Today, Ord Minnett and Credit Suisse maintained a similar view with a respective $4.05 and $3.85 target price. Ord Minnett assumes that the proposed legal restructure will be approved by shareholders. Moreover, this decision will be made at the October AGM and the first bids on its towers will be made by December. 

Morgans also released a note today. Consequently, it decided to leave forecasts unchanged. The broker notes that there are still several issues to be worked through. Additionally, further details to be released in the scheme booklet in early December. The broker retains a hold rating with a $3.33 target price. 

Downside risks for the Telstra share price? 

The restructure is generally viewed as a near short-medium term catalyst to unlock significant value for the Telstra share price. However, Goldman Sachs notes some key risks within the broader telecommunications market. Indeed, this could present downside risks for the Telstra share price. This includes: 

1) Increased competition, particularly in the mobile market

2) Disappointing cost out relative to its $2.7bn productivity program

3) Unfavourable regulation across its businesses

4) Asset monetisation is ultimately unsuccessful

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A man has computer-generated images rushing through his head indicating an AI (Artificial Intelligence) concept of a communication network.
Technology Shares

ASX investors are obsessed with Nvidia shares! Here's why

The global chipmaker reported a 94% increase in annual revenue in the third quarter.

Read more »

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another disappointing day for ASX investors this Thursday.

Read more »

two racing cars battle to take first place on a formula one track with one tailing the the leader and looking to overtake the car.
Opinions

Down 21% in 2024. This ASX 300 stock looks like a money-making monster

Profits are expected to plunge, but the future could still be bright.

Read more »

A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.
52-Week Lows

Down 68% from highs, this ASX 200 stock just hit a 4-year low. Time to pounce?

Is this beaten down stock a buy? Let's see what one leading broker is saying.

Read more »

two men smiling with a laptop in front of them, symbolising a rising share price.
Share Gainers

Why Pinnacle, PWR, Race Oncology, and Vulcan shares are flying today

These shares are having a good session on Thursday. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Accent, Sayona Mining, Web Travel, and Weebit Nano shares are dropping today

These shares are having a tough time on Thursday. Why are they being sold off?

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Share Market News

Insider buying alert: 3 ASX 200 shares directors are snapping up right now

Directors in some of Australia's blue-chip businesses aren't shying away from the market.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Broker Notes

Guess which beaten down ASX share is rocketing 11% today

Why are investors buying this beaten down stock? Let's find out.

Read more »