Why the Telstra Share Price Jumped This Week

What happened to the Telstra share price?

While the big banks have dominated the headlines with their dramatic share price falls over the last 12 months, shareholders in Telstra [ASX:TLS] haven’t fared too much better.

Trading as high as $6.50 in August last year, the Telstra share price traded briefly below $5.00 in March, before making something of a recovery. However, the last five trading days has seen the stock jump over 6% — a decent move for a telco with a $65 billion market cap.

Why did Telstra do this?

Last weekend, news broke that Telstra had agreed to sell the majority of its stake in Chinese car sale website, Autohome, for US$1.6 billion. Once converted into Aussie dollars, Telstra expects to book a $1.8 billion profit.

That’s a great return for the $76 million they paid for a 55% stake in Autohome back in 2008. For investors, though, it shows that Telstra’s CEO, Andrew Penn, might put other assets up for sale — like their share in Foxtel, for example.

All this augurs well for Telstra shareholders who have had little to cheer about over the last year.

What now for Telstra?

The discussion will now turn to what Telstra will do with its big hoard of cash. Shareholders will be rubbing their hands hoping some of it might come their way in the form of a bigger dividend. Meanwhile, some analysts are predicting that Telstra might use if for a share buy-back.

What it does signal, though, is that the new CEO is making his mark on the company; looking to offload assets that he doesn’t see as core to its business. On a current yield of 5.7% fully franked, that could mean an even better yield for Telstra shareholders for the future.

Matt Hibbard,
Money Morning

Money Morning Australia