Own Telstra shares? A division may soon be offloaded!

Australia's biggest telco is considering making itself a bit smaller.

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Owners of Telstra Group Ltd (ASX: TLS) shares need to know there's speculation the ASX telco share may soon offload one of its divisions.

Telstra is best known for its mobile and broadband connections for households and businesses. But it also has other divisions that are smaller and don't steal the limelight. And It's one of those other segments that the company may be selling.

Telco to sell Telstra Health?

According to reporting by the Australian Financial Review, Telstra is preparing to put the health division up for strategic review.

Telstra Health is a group of businesses, which provide IT and software to health and aged care groups, including government services and private healthcare providers.

According to the AFR, the health division includes the National Cancer Screening Register, the 1800Respect domestic and sexual violence counselling service, MedicalDirector, Fred IT and more.

As an example, one of the biggest businesses inside this division is MedicalDirector which Telstra acquired for $350 million. It provides clinical and practice management software for GPs. It provides services including electronic health records, patient and practice management, billing, scheduling, care coordination, medicines information and clinical content. At the time of the acquisition, it supported 23,000 medical practitioners for 80 million consultations a year.

When the AFR's Street Talk contacted Telstra about this rumour, a spokesperson declined to comment on the situation. A strategic review can lead to a sale, though it could mean no change at all.

The relatively new Telstra boss, Vicki Brady, has said the company wants to maintain the strength of its balance sheet and "optimise returns and unlock value". A strong balance sheet is normally a good thing for Telstra shares.

Revenue growth

In the FY23 result, the health division's income increased by $62 million to $305 million, including organic growth and prior year MedicalDirector and PowerHealth acquisitions. That suggests the health division's revenue increased by 25.5%.

It's not a core unit

Whatever happens with Telstra Health, it's not a large division and Telstra's revenue and net profit after tax (NPAT) seemingly won't miss it if the segment is sold.

Time will tell how much Telstra would be able to sell it for. There may be plenty of interested buyers, with healthcare offering both defensive and potentially growing earnings. Wesfarmers Ltd (ASX: WES) has shown an interest in buying healthcare businesses in recent times, such as the recent purchase of InstantScripts.

Telstra share price snapshot

The Telstra share price has gone backwards over the past year. As we can see on the chart below, Telstra shares have dropped more than 13% in the last 12 months.

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. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Telstra Group and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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