Telstra TLS reaffirmed fiscal 2025 earnings guidance, setting the base for a new five-year strategic plan. It is targeting mid-single-digit compound annual growth in cash earnings to fiscal 2030, while aiming to generate “a sustainable and growing dividend.”

Why it matters: Perception of Telstra as a premier defensive stock is likely to be enhanced by the new strategy, at a time when earnings resilience is coveted amid economic uncertainties. But, notwithstanding all the presentations, falling capital intensity and mobile tailwinds are the key drivers.

  • All-inclusive capital expenditure has risen from 14.5% of revenue in fiscal 2021 to an average of 21.5% in the next four years, extending Telstra’s mobile network leadership and infrastructure footprint. Monetization of this competitive position is the cornerstone of the new strategy.
  • It means the big improvement in mobile earnings is likely to be maintained, as Telstra continues to properly price the premium and differentiation the network can provide. This will be augmented by the accelerating 4G-to-5G transition, a migration that typically heralds a positive backdrop.

The bottom line: We lift our fair value estimate on Telstra by 4% to AUD 4.70, reflecting an average 9% cut to our capital expenditure forecasts from fiscal 2025 to fiscal 2027 on falling capital intensity. Our five-year earnings per share CAGR from fiscal 2025 stands at 3%, slightly below management’s mid-single-digit target.

  • Investor attraction to Telstra’s defensive earnings has been vindicated by the financial targets in the new five-year strategy. This has driven shares in the narrow-moat group to above our intrinsic assessment for the first time in two years.
  • The risk/reward proposition of investing in Telstra is evenly balanced at current prices. While we applaud management’s ambitious five-year targets, material changes can happen to derail plans, especially when the pace of technological change is unprecedented, as management concedes.

Telstra investor day vindicates recent stock rally

Telstra’s performance during and since the depth of covid-19 shows the resilience of its earnings and the strength of its balance sheet, especially given the negative impact on high-margin roaming revenue was material during the pandemic. The AUD 2.7 billion cost-out program under T22 has been delivered and management is now focused on hitting the AUD 500 million cost reduction target under the T25 plan.

In May 2025, Telstra unveiled a new five-year strategic plan. It is targeting mid-single-digit compound annual growth in cash earnings to fiscal 2030, while aiming to generate “a sustainable and growing dividend.”

Telstra is the largest telecommunications services provider in Australia. It has dominant market share in each service category and customer segment, and enjoys cost advantages which underpin its narrow moat rating. While competition is robust, Telstra’s mobile market shares are likely to prove resilient.

Telstra’s infrastructure provides the most comprehensive coverage for fixed-line, mobile, and broadband in Australia which drives reliable cash flow. Telstra is not the cheapest provider of telecommunications services but is the lowest-cost provider resulting in EBITDA margins of over 30%.

The NBN has reshaped Telstra and a slimmed-down operational base is now focused on mobiles and efficiency improvements. Competitive advantage in coverage and speed of the Telstra mobile network attracts customers demanding reliable mobile connectivity. The network has the capacity to handle escalating demand for data. NAS delivers value-add services on Telstra’s high-speed networks, including cloud computing, high-definition video conferencing, and managed data networks for private and public sector entities.

Offsetting its success in mobile, fixed-voice products are experiencing both structural decline and increased competition. In line with global trends, revenue from traditional voice services provided by the public switched telephone network, or PSTN, or copper network, is in decline. This is the reason why Telstra’s continuing commitment to cost reductions and efficiency gains is important.

Telstra bulls say

  • Telstra has market-leading shares across all vital telecommunications segments and is likely to maintain these positions in the future.
  • While the telecommunications space is incredibly competitive, Telstra has a significant competitive advantage via its extensive mobile and wireless networks.
  • Decommissioning of the copper network lowers capital intensiveness of the business. Telstra can redirect capital to the higher-growth mobile segment.

Telstra bears say

  • Regulatory risks are real. Wholesale NBN prices are high and could increase further, while government scrutiny on Telstra’s market power is ever-present, especially in regional and rural areas.
  • Competitive intensity is high, especially in mobile.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

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Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.