The Telstra Corporation Ltd (ASX: TLS) share price could be a mover today after revealing that it’s going to do more restructuring.
What did Telstra announce?
The telco has announced plans to change its restructuring plans so that it can potentially sell some assets.
It plans to make four different divisions.
The first will be InfraCo Fixed which will own and operate Telstra’s passive or physical infrastructure assets, this relates to the ducts, fibre, data centres and exchanges that support Telstra’s fixed telecommunications network. Separating this will give Telstra the potential to “create additional value from these assets in the future.”
The next group of assets will be in InfraCo Towers. This division would own and operate Telstra’s passive or physical mobile tower assets, which Telstra is looking to sell some of because of the strong demand and compelling valuations for this type of infrastructure, which investors view as high-quality.
The third group is going to be called ServeCo, which will continue to own the active parts of the network, including the radio access network and spectrum assets to ensure Telstra continues to maintain its industry leading mobile coverage and network superiority. This division will serve and support the customers.
Telstra also plans to make an international business under a separate subsidiary to keep that part of the business, including undersea cables, together as one entity.
The telco also said that it’s going to establish a new holding company for the Telstra Group, with the transfer of assets being done through a scheme of arrangement/takeover offer.
After the restructure, Telstra shareholders will own shares in the new holding company on a like for like basis, with no change to their ownership levels.
Leadership comments
Telstra Chairman John Mullen said:
“Even before the COVID pandemic reminded us of the enormous importance of telecommunications infrastructure globally, we could see the opportunity to provide transparency of our assets and opportunities to deliver additional value for shareholders.
“The legal restructure is a step toward that outcome. It also reflects the new post-COVID world we are living in and the fact that our assets are a critical part of the infrastructure that is enabling the nation’s rapidly growing digital economy.”
The Telstra CEO said that the proposed plan to monetise InfraCo Towers remains on track for FY22.
My thoughts on this and the Telstra share price
The Telstra share price seems like it is going to respond positively to this news. I’d bet that large Telstra shareholders like the sound of receiving large amounts of cash for assets that aren’t essential to the Telstra business.
I do think it makes sense to do this in the current low interest rate environment. But there are still question marks in my mind about Telstra’s ability to grow profit into the future. I don’t view the Telstra share price as a compelling long term buy at the moment because of its limited revenue growth options.
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