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Telstra Corporation Ltd could move into electricity retailing for growth

Source: Telstra presentation

The Australian Financial Review is reporting that Telstra Corporation Ltd (ASX: TLS) has bought the rights to a solar energy farm in Queensland in a project valued at around $100 million as part of a small move into the energy wholesale retailing space.

The power generated by the solar farm will primarily act to address Telstra’s own substantial power demands, but Telstra will reportedly sell excess electricity supply into the wholesale market if demand and prices are high.

Telstra has for a long time been looking for growth opportunities outside its dominant mobile network with its Network Applications and Services (NAS) division that is focused on enterprise cloud services and new technologies growing well, but not sufficiently to move the profit dial.

Other areas identified to help the giant telco grow include Telstra Health, Telstra Media, Telstra Software and overseas ventures in high-growth regions like Asia.

However, Telstra’s management team are yet to make much progress in developing the business, despite the group’s financial firepower. The shares have responded with a steady downtrend over the past four years, with little to support the stock other than the dividend yield.

The possibility of moving into retail electricity retailing for Telstra has been touted many times before, with junior rivals like Vocus Group Ltd (ASX: VOC) (as the operator of Dodo) active in energy retailing and commonly bundling energy and telecommunications packages in an attempt to reduce customer churn.

Despite its handy dividend, I’m not a buyer of Telstra shares as I’m unconvinced it has much needle-moving growth in it.

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Motley Fool contributor Tom Richardson owns shares of Vocus Communications Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of Telstra Limited and Vocus Communications Limited. 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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