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Highlights

  • Telstra launches Connected Future 30 strategy, aiming for mid-single digit earnings growth through FY30.

  • Shares fall 1% as investors weigh dividend franking concerns and potential business divestments.

  • Focus areas include digital infrastructure, cost discipline, and simplification of operations.

Shares of Telstra Group Ltd (ASX: TLS) dropped by 1% to AUD 4.67 in early trade following the launch of its Connected Future 30 strategy, a bold new initiative aimed at transforming the company’s role in Australia’s digital economy over the next five years.

Unveiled before Monday's market open, the strategy promises a renewed focus on Telstra’s core strengths in mobile connectivity, digital infrastructure, and enterprise services, while also emphasising cost control, investment discipline, and operational efficiency.

According to Telstra CEO Vicki Brady, the strategy responds to a critical “inflection point” in technology and connectivity. “Customer needs are changing, and the connectivity we provide has got to get more sophisticated and flexible,” she said. “As a connectivity and digital infrastructure business with a long history of innovation, this is a massive opportunity for us.”

Brady emphasised that Telstra intends to position itself at the heart of Australia’s evolving tech landscape, leveraging its established market leadership in 5G and mobile services.

Growth and Capital Strategy

Chief Financial Officer Michael Ackland provided insight into Telstra’s financial ambitions under the new roadmap. He said the company is targeting mid-single digit compound annual growth in cash earnings through FY30, underpinned by a return on invested capital (ROIC) target of 10%, up from the current 8%.

Ackland also highlighted a disciplined approach to capital expenditure and portfolio management, signalling potential divestments in non-core areas. In particular, the Network Applications and Services (NAS) portfolio may be considered for sale as part of Telstra’s push to streamline operations.

“We will continue to evaluate and deploy capital depending on strategic alignment and risk-adjusted returns,” he said. “Our approach may also involve targeted strategic investments, like our ongoing Intercity Fibre project.”

Dividend Concerns

While Ackland reiterated Telstra’s commitment to returning capital to shareholders, he cautioned that fully franked dividends may not be sustainable due to a tightening franking balance. If needed, Telstra may resort to partially-franked dividends or share buybacks to return value to investors without depleting its franking credits.

“Our strong preference is to continue to fully frank dividends,” Ackland stated. “However, if that’s not possible, partially-franked dividends or capital returns via buy-backs may be considered.”