The ASX slumped this afternoon but the Telstra Corporation Ltd (ASX: TLS) share price is bucking the downtrend as experts reacted to its profit results.
The Telstra share price jumped 0.6% to $3.27 in after lunch trade when the S&P/ASX 200 Index (Index:^AXJO) fell 0.5%.
The losses on the market deepened when Victoria announced it was re-entering a five-day hard lockdown.
Don't underestimate Telstra's profit results
But that wasn't enough to put a dampener on the Telstra share price as several brokers gave its earnings announcement their tick of approval.
UBS reckons the market may be missing the significance of the telco's decision to increase the Transacting Minimum Monthly Commitment (TMMC) on mobile plans in the current half.
While investors get that Telstra mobile subscribers would have to pay $3 more on average in 2HFY21 compared to the same period last year, that's really only half the story.
Mobile upside lifts Telstra's share price
"What the market may underestimate – and what the TMMC metric does not factor – is a $5 price increase that TLS implemented for customers who signed up between Jun-19 to Jun-20," said UBS.
"A full 6 month impact of the $5 price uplift (for a portion of the base), along with the TMMC uplift, should result in a significant postpaid ARPU acceleration in 2H21 (UBSe ~$48) vs 1H21 (~$46)."
The broker reckons that by FY23, the average revenue per user (ARPU) could go as high as $51 to $52.
Extra good news in the results
What's more, the multiples that one of Macquarie Group Ltd's (ASX: MQG) businesses is willing to pay to acquire Vocus Group Ltd (ASX: VOC) is also adding to UBS' enthusiasm for Telstra's mobile tower assets.
Meanwhile, Credit Suisse also reiterated its positive take on the Telstra share price post its profit results.
While earnings were a little lower than expected, the broker pointed out that its mobile subscriber performance was ahead of the competition.
Telstra may be the only operator to increase prices recently, but it added 80,000 net new subs in the first half. That's well above the 42,000 that Credit Suisse was forecasting.
Telstra at earnings inflection point
Another broker that is bullish on Telstra is Goldman Sachs, who pointed out that Telstra is facing an earnings inflection point in the current half.
This is will be driven by ongoing cost reductions and a robust mobile service revenue outlook, given the positive ARPU outlook and ongoing strength in sub growth, supported by the clear 5G lead that Telstra holds," said the broker.
What's more, all three brokers believe Telstra's 16 cent a share full year dividend can be sustained. This puts the Telstra share price on a gross yield of around 7% if franking is included.
