The Telstra Corporation Ltd (ASX: TLS) share price could have new life breathed into it over the next week amid plans to legally separate the company from its InfraCo business unit, as reported by the Australian Financial Review on Sunday.
Telstra shareholders can vote on the proposed company split at a scheme meeting next month. The first court hearing will be on Friday. If the split goes ahead, the business restructure will occur on 1 January 2023.
Some banking experts have given their take on what the Infraco split could mean for the company.
Let's cover the highlights.
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What could the Infraco split mean for Telstra?
Experts said Telstra will have more control over Infraco's securities. This includes the ability to "sell, float, or demerge securities in InfraCo Fixed without NBN Co consent," the article said. However, there are some conditions. One is that Telstra must own a 50.1% stake in InfraCo.
Separating Telstra's business units could prove to be expensive, with a proposed $126 million one-off cost. Plus, there's the potential for costs to add up quickly if Telstra sold more than 10% of its Infraco stake, the article said.
The broader picture is that Telstra deems the $126 million cost immaterial, according to a booklet sent to investors. The restructure will help unlock value from Telstra's infrastructure and separate management teams will mean improved focus for each business unit.
When the announcement was made in March 2021, the Telstra share price moved up 0.26%.
At the time, Goldman Sachs described the restructuring as a positive move for shareholders, stating:
We remain positive on TLS, as this update outlines the next steps of the corporate restructure and potential asset monetization, and gives us confidence that its infrastructure value will ultimately be realized by shareholders. Based on our updated transaction multiples/illustrative SOTP valuations, TLS shares currently trade on just 4.1-4.7x ServeCo FY23E EBITDA or 5.7-6.3X at our unchanged A$4.00 12m TP, vs. SPK.NZ at 8.3x. We reiterate our Buy on TLS, our preferred ANZ Telco, ahead of its FY21 results and Nov-21 ID, both of which we view as positive catalysts.
Telstra share price snapshot
Shares of the telco opened this morning at $3.81 each.
The Telstra share price is down 10% year to date. The S&P/ASX 200 Index (ASX: XJO) is down 10.5%.
The company's market capitalisation is $43.79 billion.
