Telstra Stock Moves up 1.7% after Merger News

Our recent updates on Telstra Corporation Limited [ASX:TLS] have been anything but positive. But could the tide be turning for this beat up stock?

This week, TLS has gone up two consecutive days. While unimpressive for most stocks, for the beleaguered Telstra it is a welcome change.

Telstra, Australia’s largest telco company, provides a range of services including cellular, internet, and television products; the company has numerous smaller ventures abroad but is largely based on the Australian continent.

As of writing, TLS is up 1.30% for the day, or .035 to a value of $2.725 (which, sadly, is still near 52-week lows).

Why did this happen to Telstra’s shares?

Telstra is merging its venture business with HabourVest Partners, a private equity investment firm. The news clearly made investors a little perkier about Telstra’s prospects — the company stock jumped as word spread.

The merger will seek investment opportunities in the US, Asia and Australia.

The Australian Financial Review reported Telstra has put forward another $125 million in the merger. Investors are likely happy to see this deal; the commitment is reassurance to them that Telstra intends to compete with new competitors like TPG Telecom Limited [ASX:TPM] in the tech race.

The upshot may be surprising given the company experienced outages in Sydney this Sunday. Clearly, the outages weren’t too damaging to consumer confidence.

What’s next for Telstra?

Under the helm of new CEO Andy Penn, business strategies have had a customer-oriented tilt; currently underway are plans to simplify and streamline the company, namely a sharp cut in the volume of plans and removal of data charges. Penn hopes the move will improve customer relations, though many remain dubious.

The company continues to focus on this plan, Telstra2022 — a move which previously depressed the stock. An important part of the long-term plan is portfolio management, so the investment in HarbourVest will likely prove to shareholders that the company is serious.


Harje Ronngard,
Editor, Money Morning

PS: Telstra has long been considered a favourite dividend play for Australian investors. Recent events may have taken the shine off, though. If you’re on the hunt for the best Aussie dividend investments, you should take a look at income investing specialist Matt Hibbard’s free research report, ‘The Top 5 Dividend Stocks in Australia for 2018’. Download your FREE copy here.

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

Money Morning Australia