In my view, Telstra Group Ltd (ASX: TLS) shares could be one of the best ASX blue chip options to own.
As the biggest telecommunications business in Australia, it has several advantages, including the ability to spend the most on mobile spectrum and offer customers the widest network coverage in the country. Its network covers around 1 million square kilometres, more than its closest competitor's.
The ASX telco share recently reported its FY24 result, which reaffirmed to me the attractiveness of Telstra shares and the strength of the business.
Below are my three favourite reasons for liking Telstra shares right now.
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Growing subscribers and operating leverage
In FY24, the business increased its total mobile handheld users by 4.1%, or 562,000. That growth was for postpaid, prepaid, and wholesale customers.
The overall mobile average revenue per user (ARPU) grew by 2.7%, excluding a prepaid one-off product migration. ARPU for postpaid users grew due to consumer and business price rises, prepaid user ARPU growth occurred after a "plan refresh", and wholesale customers saw ARPU growth due to a change in the mix of plans.
In my opinion, more subscribers and a higher ARPU are a winning combination.
The mobile division saw total income growth of 5% to $10.7 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 9% to $5 billion. It's a great sign when profit rises faster than revenue.
For the overall business, underlying total income rose 1% to $23.4 billion, underlying EBITDA grew 3.7% to $8.2 billion, and underlying net profit after tax (NPAT) grew 7.5% to $2.3 billion.
New subscribers are utilising the existing Telstra infrastructure, which boosts the profit margins because the infrastructure costs are being spread across more users.
Increasingly technological world
The world is becoming increasingly digital, and I don't think that's going to change any time soon, which should be good news for Telstra shares.
Developments like 5G, automated cars, VR, AI, data centres, 5G-powered home internet, and the internet of things benefit Telstra because they should increase demand for Telstra's services. Most of those developments are not cyclical, but I think they'll boost core demand significantly and create a new base for the business.
According to Telstra, over the five years ending FY24, network traffic on Telstra's mobile network has increased by approximately 3.5x and continues to grow by 20% per annum. This growing demand helped Telstra justify another price increase for mobile customers.
Rising dividend
If Telstra continues its dividend growth streak, long-term shareholders can benefit from capital growth over time and a rising cash payout each year. In FY24, the annual dividend was increased by 5.9% to 18 cents per share.
It's rewarding to own Telstra shares and receive passive income for no work each year.
At the current Telstra share price, it offers a grossed-up dividend yield of 6.4%. This could be a solid cash return as investors remain patient for higher share prices.
