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Telstra (ASX:TLS) share price up 10% in March but could go even higher

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The Telstra Corporation Ltd (ASX: TLS) share price is pushing higher again on Wednesday.

In afternoon trade, the telco giant’s shares are up 1% to $3.46.

This means that the Telstra share price is now up almost 10% since the start of the month.

Why is the Telstra share price pushing higher?

Investors have been buying Telstra’s shares since the release of an update on its proposed legal restructure, which it expects to be completed by December.

In case you missed it, the restructure will see Telstra split up as follows:

InfraCo Fixed – it would own and operate Telstra’s passive or physical infrastructure assets. These are the ducts, fibre, data centres, and exchanges that underpin Telstra’s fixed telecommunications network. Management notes that this will provide important optionality to create additional value from these assets in the future.

InfraCo Towers – this business would own and operate Telstra’s passive or physical mobile tower assets. Telstra is looking to monetise these assets given the strong demand and compelling valuations for this type of high-quality infrastructure.

ServeCo – it would continue to focus on creating innovative products and services, supporting customers and delivering the best possible customer experience. ServeCo would own the active parts of the network, including the radio access network and spectrum assets. This is to ensure Telstra continues to maintain its industry leading mobile coverage and network superiority.

What does the market think of the plan?

Unlike AGL Energy Limited (ASX: AGL) and its plan to spilt into two, the market has responded very positively to Telstra’s proposal. As have a large number of brokers.

One of those is Morgan Stanley. Earlier this week, the broker upgraded Telstra’s shares to an overweight rating and lifted its price target from $3.00 up to $4.00.

Based on the current Telstra share price, this price target implies potential upside of 15.5% over the next 12 months.

In addition to this, Morgan Stanley now believes Telstra’s dividend is sustainable at 16 cents per share and has upgraded its estimates to reflect this.

So, with the Telstra share price fetching $3.46, this will mean a fully franked 4.6% dividend yield over the next 12 months. This lifts its potential total return to an attractive ~20%.

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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. 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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