• Telstra sold a stake in its towers business in 2021
• It was on course to do the same with its fixed network assets
• But new CEO Vicki Brady has put that plan on ice
• She says current ownership structure is best for investors
• Shareholders disagree, as Telstra’s stock heads south

Telstra CEO Vicki Brady has shown her mettle by deciding not to sell a stake in the Australian telco’s fixed networks unit, a U-turn that has surprised shareholders and put a dent in the company’s share price. 

In 2021, and in line with a telecom sector trend to ‘monetise’ network assets, Telstra sold a 49% stake in its InfraCo Towers unit for A$2.8bn (US$1.8bn at current exchange rates), and the then CEO Andrew Penn signalled a similar plan for the operator’s InfraCo Fixed unit, which runs its fibre lines, ducts and fixed network facilities, including datacentres, cable landing stations and satellite ground stations. That unit is deemed to have a greater value than the tower assets, so shareholders were expecting a healthy dividend from some form of divestment.

But Brady, who took over from Penn last year, has, following a review of Telstra’s assets and a restructuring process, decided that retaining full ownership of InfraCo Fixed is in the best interests of the operator and its shareholders (at least for now). 

In comments included in Telstra’s full fiscal year presentation, Brady noted that the telco had “created a strong digital infrastructure operator and are seeing strong customer demand for our infrastructure, while our customers’ needs and long‐term demands continue to evolve. This is being shaped by the shift to the cloud and rapid AI adoption driving datacentre and edge requirements, along with needs for domestic fibre and undersea cable.” 

She added: “After thoroughly examining alternatives, we have concluded that the greatest value to be created for shareholders is by maintaining the current ownership structure of InfraCo Fixed, for at least the medium term. Our focus remains on delivering long‐term, sustainable growth, and the objectives and principles of our capital management framework, including seeking to grow our dividend. InfraCo Fixed plays an important role in enabling this, particularly in an inflationary environment.”   

Indeed, InfraCo Fixed is Telstra’s second biggest contributor to the company’s earnings before interest, tax, depreciation and amortisation (EBITDA), second only to the telco’s mobile division: In the financial year to the end of June, InfraCo Fixed generated EBITDA of A$1.66bn (US$1.07bn), 21% of the telco’s total EBITDA of A$7.86bn (US$5bn). 

News of the decision was not well received by shareholders, as Telstra’s stock lost 2.8% of its value to end Thursday trading at A$4.13, its lowest price since March, despite a 5.4% year-on-year increase in full year revenues to A$23.2bn and a 14.2% increase in net profit for shareholders to A$1.9bn. 

For more details on Telstra’s financials and operational performance, see this earnings release. 

- Ray Le Maistre, Editorial Director, TelecomTV