TLS

[Snoopy]

However the 21st May 2024 market update has indicated the inflation linked aspect of postpaid price increases will not proceed in July 2024:
"Today we announced that we will be updating the customer terms for our postpaid mobile plans to remove the CPI link annual price review. This change simplifies our pricing strategy by bringing the approach to postpaid mobile plans into line with other products. This approach reflects there are a range of factors that go into any pricing decision, and will provide greater flexibility to adjust prices at different times and across different plans based on their value proposition and customer needs."

This suggests to me that any mobile revenue increases for Telstra will likely track population growth in FY2025/FY2026 and mobile revenue growth will be no greater than that. That doesn't mean mobile network profit increases will be limited to that though, as there will be the cost savings from shutting down the 3G network.

I review the prospects of the three growth engines of this company going into FY2025.

1/ The mobile growth engine is possibly stalling.
2/ The cash benefit of the fibre superhighway is only starting to build AND
3/ Massive restructuring at Network Assets and Services is underway.

The prospect of any real growth in FY2025 is not looking great. Any forecast profitability increases from the company's historical growth engines being Mobile and TelstraHealth (being priced for recovery) are likely already priced in.

Interesting to see Telstra announcing today that they are lifting mobile plan prices in the coming few months, after canning the inflation increase in July 2024. They say it will be a price rise of $2-$4 per month. On a medium monthly plan of $65, that amounts to an increase of 3 to 6%. Probably a bit less than the previous year's inflation. But as a carrot, they are increasing the data allowance on their post paid starter plan, while keeping the price the same.

There is always some customer churn with price rises like this. So it will be interesting to observe what happens this time. With the threat of rising interest rates in Australia. I had been expecting the Telstra share price, with Telstra being a 'yield play', to head back down. Yet the opposite has happened over the last two weeks. Maybe someone second guessing a net positive from the mobile plan price rises announced today?

The other thing that may be happening is that investors are buying Telstra as a proxy for buying the $A, (like some international players buy Spark as a proxy for the $NZ). Thus if the Reserve Bank of Australia puts up interest rates in August, or there are enough market rumours to suggest that it might, then these international investors may sell down Telstra as the value of their $A invested in Telstra rises. Expect this little game, if that is what it is, to play out over the next month or so.

SNOOPY