The more things change the more they stay the same. That old proverb could well apply to Telstra Corporation Ltd (ASX: TLS). The telco’s dominance of its industry appears to be growing stronger, winning a court case against rival Optus, and reported as being a contender to build part of the NBN.
Today Telstra won a case against its main mobile phone competitor Optus, which is wholly owned by Singapore Telecommunications (ASX: SGT), with Optus found guilty of showing misleading ads to attract mobile phone subscribers. Telstra already has the largest number of mobile subscribers, the largest coverage in Australia and most consumers view Telstra’s mobile network as the best. Optus and Vodafone – partly owned by Hutchison Telecommunications (Aus) Ltd (ASX: HTA) have both struggled to make any inroads into Telstra’s dominance.
And on top of its expected $11 billion in payments Telstra expects to receive for relinquishing control of its copper network, the giant Telco could be in line to earn an additional $5 to $6 billion, playing a bigger role in the construction of the National Broadband Network (NBN). A fibre-to-the-node pilot is expected to be completed within a month, and if successful, could become one of Australia’s biggest fibre-to-the-node rollouts.
Earlier this year, Telstra announced that it was selling 70% of its telephone directory business Sensis for $454 million, and could sell the remaining 30%, if the federal government removes the requirement for the telco to produce and distribute the White Pages directory. Given Sensis is a declining business, $454 million is likely to be much more than the business is worth in a few years.
Selling off the Sensis business and focusing on its core telecommunication and IT operations, such as mobile phones, broadband, data centres, network applications and services, its part ownership of Foxtel with News Corp (ASX: NWS) and its international businesses should see Telstra generate higher earnings growth.
Telstra certainly has a lot going for it in 2014. After raising its legendary dividend by half a cent for the six months to December 2013, shareholders could see a further rise in dividend, not just this financial year, but in 2015 and beyond. Growing earnings will be the icing on the cake.