Why the Telstra share price is rising today

Telstra Corporation Ltd (ASX: TLS) has seen its share price rise more than 2% to $5.26 in early trading, leading the gains in the Top 20 shares.

The telecommunications giant announced today that it had scrapped a planned joint venture in the Philippines and the market was obviously relieved.

In August last year, Telstra confirmed speculation that it was considering an investment in a wireless joint venture in the Philippines with beer giant San Miguel Corporation. At the time, the company said no agreements had yet been reached, and there was no certainty that it would proceed. The telco had been willing to invest up to US$1 billion should the joint venture have proceeded.

Telstra’s shares were trading at around $5.90 in August 2015, and they dropped 10% – compared to the flat performance of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which is down just 0.5%.

Today, Telstra CEO Andy Penn said,

Despite an enormous amount of effort and goodwill on all sides, we were simply unable to come to commercial arrangements that would have enabled us all to proceed.

The company says it has offered to provide technical network design and construction consultancy support to San Miguel, should those services be required. Telstra also reiterated that it continues to pursue growth opportunities in Asia and reminded everyone that the company is now one of the largest connectivity providers in Asia, following its acquisition of Pacnet in April 2015.

Foolish takeaway

Clearly investors saw the deal as highly risky and are happy the company has pulled out. But the telco is still likely to pursue more deals in Asia to generate growth it is struggling to find in Australia.

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Motley Fool writer/analyst Mike King owns shares in Telstra Corporation. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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