Could the Telstra Corporation Ltd (ASX: TLS) share price be worth considering for its international growth plans?
Over the past year the Telstra share price has fallen by over 20% which is only part of the falls since 2015, it has more than halved since then.
Telstra was once one of the most-loved blue chips with an unassailable moat. Its cable infrastructure gave it an excellent source of earnings.
However, the NBN has utterly devastated the whole telco industry. It was launched too late and cost too much. It is now seen as annoying by customers and it doesn't provide the speeds that citizens are getting in other countries such as South Korea.
The wholesale costs are high, causing profit margins for telcos to be very low.
However, the Sydney Morning Herald may have revealed where Telstra could find growth. The telco is supposedly planning a significant expansion in China to help local businesses grow internationally.
Telstra head of enterprise Michael Ebeid is seeking international growth. Competition laws block Telstra from expanding in the telco space in Australia, but it apparently is the only foreign carrier with a licence to operate in and out of China.
The SMH quoted Mr Ebeid as saying "If you've got companies in Australia who are doing business in China we can then have a complete network for them from here right through into Chinese cities and vice versa for Chinese companies doing business here.
"There are so many amazing Australian companies that have developed businesses and become multinationals in a lot of Asian regional countries and we need to be able to support them beyond Australian shores."
Foolish takeaway
That sounds like a good idea to me. The Australian household is very price sensitive, but being more focused on businesses could be the right call. Critical infrastructure, agriculture, transport, logistics, robotics, cybersecurity and cloud-based networks are all growth areas that Telstra can focus on. 5G is very important for Telstra to get right.
At the pre-open price it's valued at 14x FY19's estimated earnings with an estimated FY19 grossed-up dividend yield of 8%. If Telstra expands internationally then it could be attractive at this price, but I personally wouldn't want to consider shares until the expansion is confirmed.
