Telstra revised FY19 guidance on lower NBN connection payments, but the stock has bounced ~3.5% on the back of the news despite the broader market falling. It what was initially feared as just another TLS downgrade – something the market has become accustomed to in recent years – traders actually welcomed the news which saw Telstra reduce EBITDA guidance range fall $100m to $8.7b-$9.4b, more or less immaterial. The fall has been blamed on NBN connection numbers being revised lower in the NBN’s corporate plan announced on Friday, and hence one-off payments to Telstra for these connections will be delayed until 2020. This is partially offset by customers then remaining on the Telstra copper system for longer.
So why the bounce? Firstly the downwards revision is minor – 1.1% fall in EBITDA – and the receipts will still be paid. This is not a downgrade on lost business, just a slight delay. Secondly, the statement said “changes will be financially positive to Telstra over the full rollout.” Many in the market having been looking for signs the worst is behind Telstra, and these comments clearly suggest that.
Telstra (ASX:TLS) Chart
Market Matters Take/Outlook
While FY19 will be soft, the market is now looking at impacts from FY20 and beyond and we believe there is too much negativity around Telstra’s long term trajectory. Today’s share price moves reinforces that view
