The Telstra Corporation Ltd (ASX: TLS) share price is on watch this morning after investing in some more 5G spectrum.
Telstra’s investment
The Australian telco giant has announced that it has bought another 1000 MHz in the 26 GHz spectrum auction, investing $277 million to further extend its 5G leadership.
This spectrum adds to Telstra’s holdings in all major capital cities and regional areas where it was sold.
Telstra CEO Andrew Penn said the new mmWave spectrum would “dramatically” increase capacity and speeds for Telstra customers, building on the experience that Telstra customers already get.
He pointed out that high speed connectivity and the digital economy have become central to all of our lives. 5G will be very important for that in the future.
The mmWave spectrum is apparently good at providing high speed mobile broadband in high-density areas, such as built up cities and towns, train stations, sports stadiums and other locations with a high concentration of people using their mobile devices.
Telstra has been testing mmWave at different sites for a while and managed to achieve download speeds of 5 gigabytes per second. That’s a HD movie in one second. It launched the first mmWave-compatible device in May 2020 and it’s working with global device makers to bring more mmWave capable devices to market in 2021.
Selling the possible uses of the technology, Mr Penn said: “Imagine watching the Grand Final at the Melbourne Cricket Ground with your 5G-powered augmented reality goggles overlaying real time player stats, all at the same time as thousands of others are enjoying the game alongside you – that’s the immense bandwidth and speed that mmWave can offer.”
Competition for the NBN
One key selling point for Telstra is that it would enable the mobile network to be used more effectively for 5G broadband at home. It may be able to provide fast and reliable internet where the current fixed connection may not meet a customer’s needs.
This could lead to much higher margins for Telstra for each home broadband customer.
Summary thoughts about Telstra and the share price
Telstra’s 5G now covers around two thirds of the Australian population. It will reach 75% by the end of June 2021. Over 3,200 Telstra 5G sites cover over 160 cities and towns.
The Telstra share price hasn’t done much over the last few years. The profit has actually been going backwards during this period. That’s why the profit is so much lower than it was five years ago.
I’d only be interested in Telstra if it can demonstrate organic profit growth, otherwise the share price and dividend aren’t likely to achieve any growth. However, some investors may be attracted to the consistent dividend of $0.16 per share, which is a fully franked yield of 4.7%.
There are quite a few ASX dividend shares that may be able to deliver growth.