The Telstra Group Ltd (ASX: TLS) share price is down approximately 20% since June 2024, as seen on the chart below. When an ASX blue-chip share has fallen so far, it's useful to consider whether the market is being too pessimistic.
The ASX telco share recently talked about troubles it's experiencing with the enterprise division, though it is embarking on a cost-cutting program which is expected to see thousands of jobs cut.
Telstra is expecting to achieve $350 million of its T25 cost reduction ambition by the end of FY25, though this comes with one-off restructuring costs of between $200 million to $250 million across FY24 and FY25.
Amid this restructuring, I think investors shouldn't forget about the three factors below.
Revenue is still growing
The company has a number of divisions, but the crown jewel mobile division continues to deliver for shareholders.
In the FY24 first-half result, the business made earnings before interest, tax, depreciation and amortisation (EBITDA) of $4 billion, with the mobile division generating $2.5 billion of that overall EBITDA. Growth in this division is an important driver of the overall business.
HY24 mobile services revenue increased 6% thanks to handheld services in operation (SIO) growth. HY24 mobile SIOs increased 4.6%, or 625,000, year over year.
In the May update, Telstra revealed its mobile subscriber number growth for the first four months of the FY24 second half was "consistent with the first half of FY24". In my opinion, that's positive commentary.
The fact that the Telstra share price is lower amid this growth suggests to me it's better value.
Profit is increasing
I think the most important thing to keep in mind is a company's ability to generate net profit after tax (NPAT) and/or cash flow. If the profit is regularly growing then this can support a higher Telstra share price in future years.
In the HY24 result, Telstra's NPAT rose 11.4% to $1 billion.
I'm not expecting Telstra's profit to grow every result, particularly with its one-off restructuring costs, but investing is about the long-term, and Telstra's future looks appealing.
For starters, Telstra recently reaffirmed its commitment to deliver its compound annual growth rate (CAGR) targets for underlying EBITDA, earnings per share (EPS) and return on invested capital (ROIC) growth.
Telstra said in its May update that the growth of the mobile business has "underpinned" its EBITDA growth in FY24 to date. In FY25, Telstra is expecting underlying EBITDA to grow to between $8.4 billion and $8.7 billion.
The broker Goldman Sachs thinks Telstra EPS can rise from 17.3 cents in FY24 to 20 cents in FY26. The ASX telco share's rising profit could also fund a growing dividend if that's what the board of directors decide to do with the increasing profitability.
Data demand is rapidly climbing
National data usage is growing rapidly in Australia (and globally). AI and data centres are driving a significant increase in data use and power demand, and Telstra is one of the main businesses that is helping transmit data into and around Australia.
Household demand is growing thanks to online video streaming, VR, online gaming and so on.
I believe there is a growing prospect that 5G (and eventually 6G) developments could help encourage households to use wireless-powered broadband rather than the NBN. This could unlock higher profit margins for telcos, which could help Telstra's shares. In the FY24 first-half result, Telstra said its fixed wireless offering take-up doubled over 12 months, though that's starting from a small number.
