The Telstra Corporation Ltd (ASX: TLS) share price has edged higher this week despite the market weakness.
This appears to have been driven by the telco giant announcing price increases to its mobile plans.
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What are the changes?
Telstra has announced the introduction of inflation linked pricing. This will see the company index its mobile plans by CPI on an annual basis.
According to a note out of Goldman Sachs, its analysts see this "as a positive development" and "could be meaningful for supporting industry rationality." This is based on what the broker has seen globally in the industry.
Its analysts highlight that that in July Telstra's advertised postpaid plans will increase by $3 to $4. This will see its Basic/Essential/Premium plans now at $58/$68/$89 per month.
And while no changes were made to its Belong or MVNO pricing, the broker suspects that the introduction of 5G to these brands will be a "potential catalyst for updated pricing."
Overall, the broker appeared pleased with the changes, though they may have fallen a touch short of its expectations. Goldman commented:
While the Jul-22 pricing increase was within our range of expectations for Telstra (headline +$3-6 increases), it appears the impact from these plans will be lower than our +$2.50 prior growth expectations for FY23 (adjusting for GST, share of in-market plans, and impacts from spin downs / Belong dilution). Looking forward, we believe Optus' pricing strategy will now be in focus following recent comments at its FY22 result, and noting TPG is awaiting the outcome of its Mobile Network sharing proposal with Telstra.
Is the Telstra share price good value?
Goldman Sachs currently has a neutral rating on the company's shares.
However, with its price target of $4.30, based on the current Telstra share price of $3.98, this still implies potential upside of 8% for investors over the next 12 months.
Goldman is also forecasting 16 cents per share dividends in FY 2022 and FY 2023. This equates to a 4% annual yield, which stretches its total potential 12-month return to 12%.
