ASX investors have both loved and hated Telstra Group Ltd (ASX: TLS) shares over the years. Back in the early 2010s, when Telstra was a rock-solid, 7%-yielding blue-chip share, there wasn't a lot to hate.
But between 2016 and 2018, when the telco slashed its cherished dividend and lost half of its value, there wasn't a lot to love.
So how should investors treat this ASX 200 telco in 2023? Is it hate, love, or something in between?
For one ASX expert, it's decidedly love. Investors Mutual Limited (IML) is an ASX fund manager, with funds covering most corners of the market.
Last week, IML portfolio manager Lucas Goode penned an article discussing IML's thoughts on the telco. And rather than '10 things I hate about Telstra', it could be summed up as '5 things we love about Telstra'.
Why this ASX fund manager loves Telstra shares right now
"Telstra shares are good value"
Goode points to the cessation of the pricing wars that Telstra was bogged down with between 2016 and 2019 as driving the value it sees in the telco today. The competitive dynamics in the telecommunications space have changed dramatically since then, with former rivals TPG Telecom Ltd (ASX: TPG) and Vodafone merging, as well as Optus abandoning aggressive pricing cuts.
As such, Goode concludes that "since 2021 the main parties have acted more rationally, increasing their pricing to pursue greater profit and returns for shareholders", thus "we think Telstra shares are reasonable value right now".
The telco's domination
The article points to Telstra's long-standing and continuing place at the top of the pole when it comes to Australia's telecommunications sector. Goode highlights that the telco has "a strong brand [and] the best network coverage in Australia". As such, it can afford to "charge a premium over its competitors, and therefore has the best margins in the industry".
The article points out that as all telco providers increase prices for their mobile services, Telstra's position as the market leader will allow it to bank "the lion's share" of the spoils.
A growing dividend
We've already discussed the dark days of Telstra's dividend cuts in 2016 and 2017. But those days are thankfully far behind the company today. In a boon to shareholders, Telstra was able to hold its dividends steady through the COVID-ravaged years of 2020 and 2021. And last year, it gave investors their first dividend pay rise in eight years.
Goode notes this situation as extremely positive for shareholders, which is hard to disagree with.
Telstra shares are inflation resistant
It's no secret that, after decades of obscurity, inflation has burst back onto the investing scene as one of investors' biggest worries in 2023. But this doesn't trouble IML, which sees Telstra shares as inherently resistant to the corrosive effects of inflation. Goode highlights the fact that telecommunications are highly defensive, as phone or internet access is right down the bottom of the household budget hit list.
Goode also argues that Telstra has relatively low staffing costs, which limits the company's exposure to wage inflation. The company's T25 cost-cutting plans can also help to allay inflationary pressures as well.
An "excellent" CEO
For years, Telstra was helmed by Andy Penn. But last year, Penn was succeeded by Vicki Brady. Goode sees Brady as yet another reason to invest in Telstra. Here's what he finished with:
In a high-inflation environment, there aren't many businesses where you would be confident about their ability to improve margins in future years. With Telstra's innate advantages and strong management team, led by the excellent Vicky Brady, we think it's well positioned to do just that.
Foolish takeaway
So there you have it, five reasons why IML loves Telstra shares right now. The telco has had a corking year to be sure, up 9.6% year to date in 2023, hitting several new 52-week highs along the way. But let's see what the rest of the year has in store for this ASX 200 blue-chip share.
At the last Telstra share price, the company was trading at a market capitalisation of $50.03 billion, with a 3.93% dividend yield.
