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As the coronavirus sends investors running for the hills, a share market fall has seen many credible companies endure a plummet in their market value.
For example, ASX-50 lister Telstra has seen its shares tank 13.4 per cent since the start of the year. For some, the drop from a share price over $6 in 2015 to $3.12 five years later may not inspire confidence.
But for those who are yet to get in on the Telstra game, a lowered share price, battered like so many others by the COVID-19 storm, could represent an opportunity too good to miss.
A bumpy ride
The past few months have proved turbulent for the Telstra share price. On January 20, the company was trading for a high of $3.88 per share, but went to a low of $3.02 each on April 23.
But this struggle isn’t new. In fact, the share price has been trending down over the last few years as Telstra faces the rise of NBN. On top of that, it has also had to watch out for the potential merger of TPG Telecom (TPM) and Vodafone Hutchinson (VHA).
Additionally, Telstra has introduced the Telstra 2022 transformational program, which aims to restructure the organisation and cut some costs — an action aiming to deliver billions in cost savings, which could boost the Telstra’s shares in the long run.
However, the company has been forced to push this program back due to the coronavirus’ impacts.
COVID-19 hits
Everyone is in some way feeling the impacts of COVID-19. Even worse? No one knows how long businesses will keep feeling the financial impact.
However, Telstra has an edge over its competitors as the leader in 5G networks, as major bulldog TPG pulled out to focus on its prospective merger. As many people are working from home will be looking for the right working conditions, putting Telstra in a potentially good spot.
During the pandemic, Telstra pledged to hire 1000 new staff and suspend payment fees for small businesses in a bid to support the economy through COVID-19.
The new staff will work on temporary contracts to help manage call centre volumes. Telstra will also spend $500 million on projects throughout the year to inject much-needed capital into the Australian economy.
CEO Andrew Penn said it’s times like these that big business can show leadership and make a contribution to the national response.
However, the mobile service provider recently announced it is taking a $300 million blow from its 35 per cent stake in Foxtel. Telstra holds a 35 per cent interest in the television company, but is dropping the value of its investment from $750 million to $450 million.
Telstra made the call after News Corp said Foxtel was primarily to blame for a $1.1 billion cash impairment recorded in the company’s latest quarterly report.
But the Aussie telco has also secured a €500 million ( approximately A$860 million) bond issue to strengthen its balance sheet. Since mid-March Telstra has secured an additional $940 million in bank facilities.
How do other telcos stack up?
TPG Telecom (ASX:TPM)
TPG has had a rollercoaster year, with the company peaking at $8.35 per share on March 5 and heading as low as $6.41 each on March 23. This rollercoaster happens as the company navigates its prospective merger with Vodafone.
Business has been usual for TPG, as it has upgraded its earnings guidance for 2020 based on some nicely bolstered half-yearly profits.
Hutchison Telecommunications (ASX:HTA)
Hutchison has also had a rollercoaster year. The company was trading for 18 cents on March 6, but hit a low of 10 cents on March 24. These price changes were also mostly due to the potential merger news.
Spirit Telecom (ASX:ST1)
Moving away from the telecom giants, smaller companies like Spirit have seen revenue growth as more people rely on their internet at home.
Today, the company announced it enjoyed 146 per cent revenue growth to $14.3 million from January to April 2020 compared to the same time last year.
The internet services company is currently thriving during the COVID-19 pandemic as Australians are more reliant on high-performing internet.
The Bottom line
One thing that could make shareholders perk up is that Telstra paid its interim and special dividends at eight cents per share in March. So far, everything looks on track for the final dividend, due to be paid in September.
The company is investing heavily in 5G technology, which has the potential to takeover the current 4G tech that’s been used across all mobile devices.
So, as the country’s biggest telco, trading at a heavy discount, Telstra’s shares are definitely worth a watch.
