Telstra (ASX:TLS) share price leaps on $2.8 billion sale

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The Telstra Corp Ltd (ASX: TLS) share price is leaping higher today after the company announced a major divestment this morning. Telstra shares are currently up 4.03% to $3.75.

Below we take a look at the ASX telco’s news.

What did Telstra announce this morning?

The Telstra share price is rising after the company reported it had sold a 49% interest in Telstra InfraCo Towers to the Future Fund, Commonwealth Superannuation Corporation, and Sunsuper.

InfraCo Towers has roughly 8,200 towers across Australia, the largest provider of mobile tower infrastructure in the country.

Telstra said it expects to receive $2.8 billion after transaction costs, with completion of the acquisition expected in Q1 on the 2022 financial year (FY22). Telstra CEO, Andrew Penn, Telstra’s CEO, also revealed that the company plans to return approximately 50% of net proceeds from the sale to Telstra shareholders in FY22.

The company will retain a 51% ownership of the Towers business, including the radio access equipment and spectrum assets, to safeguard its national mobile coverage. Telstra has penned a 15-year extendable agreement with InfraCo Towers for access to existing and new towers.

Commenting on the divestment, Penn said:

Today’s announcement is a further endorsement of the [T22] strategy, as the establishment of our infrastructure assets as a separate business was designed to enable us to better realise the value of these assets, take advantage of potential monetisation opportunities and create additional value for shareholders and that is exactly what today’s announcement achieves…

Telstra’s objective in seeking a strategic partner has been to maximise overall value for our shareholders, maintain control of the assets and agree terms that secure Telstra’s mobile network leadership and competitive differentiation into the future. I am pleased that we have been able to achieve that ahead of schedule through this transaction announced today.

Penn added that the company plans to invest $75 million from the proceeds “to further enhance connectivity in regional Australia”.

After returning 50% of the net proceeds to shareholders (details to come with Telstra’s full year result release in August), the company intends to use the remainder for debt reduction to maintain a strong balance sheet.

Telstra share price snapshot

Telstra shares have gained 20% over the past 12 months, trailing the 25% gains posted by the S&P/ASX 200 Index (ASX: XJO).

Year-to-date the Telstra share price has outperformed, up 25% so far in 2021.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation 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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