The Telstra Corporation Ltd (ASX: TLS) share price continued its 2019 redemption this June, with Telstra shares up another 7% over the month. This caps off a stellar year for Telstra shares and a stunning turnaround for a stock which, this time last year, was one of the dogs of the ASX.
A brief history of Telstra
Telstra used to be the most beloved dividend stock on the ASX. With a gross yield of over 10% for most of its post-float history, Telstra was about as good as it got for a dividend stock. As the T2 float was completed, Telstra shares almost reached $9 back in 1999, but never saw these levels again after the dot-com crash. Telstra used to have a virtual monopoly on the Australian telco sector. By owning the entire communications 'copper' network, Telstra's competitors first had to rent the network from Telstra before having to compete with… Telstra. This absurd situation helped prop up the dividend for the best part of two decades.
This all came to an end with the rollout of the NBN. The NBN nationalised the old copper network and forced Telstra to compete on an even playing field. Telstra was forced to write down its books over and over again and its share price followed suit. Telstra was trading for over $6.60 in 2015 but by mid-2018, the price had reached an all-time low of $2.60 as the one-off dividends from the sale of the copper network dried up and then the regular dividends followed. Telstra's dividend is currently sitting at almost half of what it used to be at 16 cents per share.
Telstra's not-so-bad, really good year
So things were looking very bad for the telco giant 52 weeks ago. But Telstra has managed to lift sentiment around its shares this year, which are up over 40% YTD, including a 7% lift in the month of June alone. A number of things have gone Telstra's way so far. The Federal Government's ban on the Chinese-owned telco Huawei operating infrastructure in Australia has hobbled Telstra's competitor TPG Telecom Ltd's (ASX: TPM) plans to build a 5G network in Australia, which leaves more room for Telstra to execute on its own 5G plans. Further to this, the ACCC decided that TPG's proposed merger with Vodafone was not in the national interest and blocked these companies from becoming a larger competitor to Telstra. These factors, along with the dividend stabilising at the 16 cents per share level, have combined to lift Telstra's share price to its current levels.
Foolish Takeaway
While Telstra has seen phenomenal gains this year, I personally don't see much more upside in the share price at current levels. I think the buyers and sellers are now pretty much balanced and Telstra has found its intrinsic value.
