Telstra (ASX:TLS) share price on watch after NBN news

The Telstra share price is on watch on NBN news.

| More on:
telstra share price

Image source: Getty Images

The Telstra Corporation Ltd (ASX: TLS) share price is on watch after some NBN news.

NBN credits

According to reporting by the Australian Financial Review, the NBN Co is going to give retail internet providers like Telstra, Optus and TPG Telecom Ltd (ASX: TPG) a combined $5.2 million of credit to offset excess capacity fees with a surge of data demand by households during these latest lockdowns.

It was also reported that more credit could be given in the next few weeks and months ahead if demand continues to be much higher than expected.  

The AFR quoted NBN executive Ken Wallis, who said:

The credit payment…is designed to reduce retailers’ additional wholesale data coverage costs brought on by the incremental increase in usage during the peak evening entertainment hours and to help to ensure they do not fall short of their customers’ data demands.

However, executives from Telstra, TPG, Optus and Vocus were all displeased by what NBN had decided. The telcos said it wasn’t enough.

The Aussie Broadband Ltd (ASX: ABB) managing director Philip Britt was less critical. The AFR quoted him saying:

Given that NSW is going to be in lockdown for at least another four weeks, we welcome NBN Co’s continuing relief for as long as the lockdowns continue. We will continue to monitor usage closely, and will advocate for more relief if required.

How is Telstra’s share price and earnings going?

Telstra reported its half-year result on 11 February 2021. It has risen almost 20% since reporting.

When Telstra reported, it said that after a decade of disruption following the creation of the NBN, and with its rollout now declared complete, it can see a path to underlying growth ahead.

The company’s half-year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) decreased 14.2% to $3.3 billion. Within that, there was an in-year NBN headwind of $370 million and an estimated $170 million impact from COVID-19.

On a reported basis, total income fell 10.4% to $12 billion and net profit after tax (NPAT)

The company continues to add subscribers, but its margins have been falling because of the NBN and rising competition.

Telstra is expecting an in-year NBN headwind of approximately $700 million in FY21.

The telco has been working on reducing its cost base, improving efficiencies and selling assets to maximise its value for shareholders.

Is the Telstra share price good value?

One of the latest brokers to have their say on Telstra is Ord Minnett. The business thinks that Telstra is a buy with a price target of $4.25. The cost savings are an important part of the equation for the broker.

The broker thinks that Telstra is going to pay a fully franked dividend of $0.16 per share in FY21 and FY22, which translates to a grossed-up dividend yield of 6%.

Should you invest $1,000 in Telstra right now?

Before you consider Telstra, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Telstra wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Aussie Broadband Limited. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Communication Shares