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Telstra share price edges higher on major COVID-19 update

Telstra share price
Source: Telstra presentation

The Telstra Corporation Ltd (ASX: TLS) share price is edging higher on Friday after the release of a major COVID-19 update.

At the time of writing the telco giant’s shares are up 0.5% to $3.29. 

What did Telstra announce?

This morning Telstra announced a number of important measures as part of its contribution to the national economic stimulus response to the COVID-19 outbreak.

Telstra’s CEO, Andrew Penn, explained that it was in the nation’s interest for every company, organisation, and individual to play a part in ensuring Australia comes through this challenging time as strongly as possible.

He said: “We are looking at every aspect of our business to see what we can do for our employees, customers, suppliers and the economy more broadly, while we maintain a focus on long term value creation.”

“The most important thing is that as many businesses as possible are still here when we get through this crisis. While it is critical we maintain a strong position we also believe there are a range of additional initiatives we can undertake now to help support the broader economy,” Mr Penn added.

What are these initiatives?

Telstra advised of the following:

  • Putting on hold any further job reductions. While Telstra will continue to focus on its productivity program to reduce underlying fixed costs by $2.5 billion annually by the end of FY 2022, it will not announce any further job reductions over the next six months.
  • Recruitment of an additional 1,000 temporary contractors in Australia to help manage call centre volumes.
  • Bringing forward $500 million of capex from the second half of FY 2021 into calendar year 2020. This capital will be deployed to increase capacity in its network, including further accelerating the roll out of 5G and injecting much needed investment into the economy at this time.
  • Providing relief to small business and consumer customers unable to pay their bills by suspending late payment fees and disconnections until at least the end of April.
  • Extending any sponsorships expiring this year for another 12 months, providing more certainty to partners and the many causes Telstra supports.

These measures are in addition to others already announced, including the provision of unlimited data allowances on fixed broadband, extra mobile data for Telstra’s consumer and small business customers, and extra paid leave for Telstra employees and casuals.

Outlook.

At this point, the company warned that the ultimate impact from COVID-19 on its business is difficult to assess.

“Like many businesses it is expected to be material and will depend on how the situation and its impact on the economy and our customers evolves,” Mr Penn said.

But based on the information available today, including the measures above, Telstra’s current outlook remains within the range of its FY 2020 guidance.

However, that will be at the bottom end of the range for both Free Cash Flow and underlying EBITDA, at the bottom end of the range of $0-500 million for growth in underlying EBITDA (excluding the in year NBN headwind), and at the top end of the range for capex.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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 Scott Phillips.

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