TLS has the leading share in fixed voice, broadband, mobile services, and the corporate/enterprise market. TLS mobile division benefits from a network quality advantage that underpins a 49% subscriber market share position. TPG Telecom’s aborted plans to enter the mobile network market are likely to diminish fears of heightened competition and this should improve sector margins for TLS’s biggest revenue division.
As the NBN is rolled out competition in broadband will intensify but it is the explosion in data consumption for mobile that is a driving force for greater demand for the service. TLS’s sustainable cost advantage from unrivalled scale and large infrastructure footprint will mean that it has consistent capital spending to maintain this competitive edge. This advantage was evident again in their recent Full Year results as it showed continued strong momentum in mobile subscriber growth. Furthermore, the transformation program (job-shedding, digitisation, and simplification of plans) remains on track to achieve $2.5bn in cost savings by 2022 including the program of monetising assets (unlocking $1bn of a proposed $2bn in infrastructure assets by 2022) and the strengthening of the balance sheet to fund future growth and dividends. On the back of these improvements, TLS is forecast to pay a steady and sustainable 16c per share in fully franked dividends p.a. (over the next 3 years) which equates to a 4.7% (6.7% grossed up) and this is very attractive in the current low-interest-rate environment. Despite, a good result in August and declining interest rate expectations TLS shares have fallen by 15% in the past 2 months back to excellent levels to accumulate once again.