The past 4 years have been a hard road for long-term Telstra investors.
I continue to hold for the dividends and on the back of the Governments desire to bring in the NBN Co. We are now in the final stages of ACCC approval for the transition of Telstra’s copper wire to NBN Co.
I expect that we will see the approval come in February 2012, this will clear the way for the $9 billion payment to start flowing along with another $2 billion from the Commonwealth Government package.
Beyond these payments Telstra is still expected to be able to maintain its current dividend level, which is now a gross yield of 12%.
The real kicker is that the ACCC will not limit the promotion of wireless networks in competition with NBN Co.
At present momentum is strongly with wireless, around 12% of households are currently wireless only. We expect that this will jump to 20% over the coming 5 years, with both the 3G and 4G networks providing good download speeds. We expect to see this market expand as consumers demand for internet access while on the move increases.
As Telstra remodels itself into a sale operation away from the monopoly it was, wireless will be the main product.
The question is do customers want really high speed or a combination of speed and mobility.
I think speed will be important to large business while a combination of speed and mobility will be important to small business and retail buyers.
I will continue to hold Telstra for the dividend and have a price target of $3.60.
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