Telstra (ASX:TLS) share price climbs on new $1.6 billion ‘nation-building’ projects

The Aussie telecom giant has two new projects up its sleeve..

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Key points

  • Telstra has announced two new telecom projects costing up to $1.6 billion
  • The projects are set to improve nation-wide connectivity
  • The Telstra share price is up this morning amid the news

The Telstra Corporation Ltd (ASX: TLS) share price is in the green in early Wednesday trading.

At the time of writing, Telstra shares are swapping hands for $4.00 each, up 1.52% on yesterday’s closing price.

The lift coincides with the company making two new project announcements, promising higher connectivity for Australians. These are expected to cost up to $1.6 billion on top of Telstra’s business-as-usual spending over the next five years.

So what does this mean for Telstra investors?

Let’s dive straight in…

ViaSat satellite program

The Aussie telecom giant and global communications company Viasat are collaborating to provide Australians with higher data and video streaming speeds.

The move is part of an already agreed-upon 16.5-year contract and will support the ViaSat-3 terabit-class global satellite system.

Today, Telstra announced it will bring connectivity to “multiple redundant data centres” by co-locating existing Viasat satellite access node (SAN) equipment across Australia.

It will then build and manage the high-speed links to the sites which will “house the core networking equipment expected to manage the increase in data traffic”.

When completed, it will enable 1Tbps of “total network capacity” in delivering speeds of more than 150Mbps.

According to Telstra CEO Andrew Penn, it will create the “largest-scale satellite solution deployment in the nation’s history”.

New fibre paths

Secondly, Telstra is set to build dual fibre paths that will enable “ultrafast connectivity between capital cities and improved regional connectivity”.

As such, the move will allow “20,000 route kms of new ultra-high capacity, low-latency fibre”, enabling “transmission rates of up to 650Gbps (six times today’s common rate of 100Gbps)”.

This will not only allow for faster network connectivity between Australia’s capitals but also regional areas.

These higher speeds are set to support remote working environments, education, and deliver high-definition entertainment and gaming speeds.

Mining and agriculture will also benefit and the project will allow for higher capacity mobile backhaul.

Work is set to commence in late FY22 with early trial and test deployment already underway.

Comment from CEO

All in all, the projects will cost Telstra an additional $1.4-1.6 billion to its business as usual capital expenditure over the next five years.

However, the company expects its cash flow to remain “ahead of accounting earnings”, with capital expenditure including the investment estimated to be “$250 million per annum lower than adjusted depreciation and amortisation”.

Telstra CEO Andrew Penn said:

Investing in these two truly significant projects will see us continue to have the largest inter-city fibre network in the country, helping to future proof Australia’s digital economy and further improving connectivity in regional Australia.

We’re already seeing connection speeds on the current network surge from 100GB to 400GB and beyond through our investments to date. There is a growing demand for greater fibre capacity, enabling massive bandwidth and ultrafast data rates with lower latency.

The time for delivering the infrastructure to support this is now.

Our strong cash flows and T25 growth ambitions provide us the flexibility to make these strategic infrastructure investments, while maintaining flexibility to return excess cash to shareholders. Together, these investments are expected to deliver incremental long-term accretive growth.

Telstra share price snapshot

Over the last 12 months, the Telstra share price has lifted by more than 24%. It hit its 12-month high of $4.26 on 18 January, a healthy recovery from its low of $3.06 in March 2021.

The company also makes regular dividend payments — an interim in March and a final in September.

The telecom company has a market capitalisation of around $46 billion and a price-to-earnings ratio (P/E) of 25.13.

Motley Fool contributor Alice de Bruin has no position in any of the stocks mentioned. 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 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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