Telstra Group Limited (TLS.AX): Initiate at Neutral on valuation; See Medium-Term Margin upside

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Telstra Group Limited (TLS.AX): Initiate at Neutral on valuation; See Medium-Term Margin upside

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16 Jun 2026 05:55:37 ET │ 54 pages

Telstra Group Limited (TLS.AX)

Initiate at Neutral on valuation; See Medium-Term Margin upside

CITI'S TAKE

We initiate coverage on Telstra with a Neutral rating and A$5.50 target

price. Telstra’s Mobile business has been the key driver of growth business

which in our view reflects structurally improved industry and we expect it to Neutral

continue, with Mobile EBITDA expected to increase by ~$1 billion between Price (16 Jun 26 16:00) A$5.12

FY26e and FY30e. Importantly, we estimate the combination of mobile

Target price A$5.50growth, AI-led cost-out and focus on core connectivity/shrinking non-core

segments such as NAS to generate ~$13 billion in cash earnings between Expected share price return 7.4%

FY26e and FY30e and underpin a growing dividend as well as further Expected dividend yield 4.3%

buybacks. However, with the stock trading at a 22x FY27e PE (19x cash

Expected total return 11.7%earnings) and ~4% dividend yield, we do not see the risk-reward as

compelling at current levels. Market Cap A$57,032M

US$40,647M

Consensus subs forecasts too high; price increase to underpin Mobile growth —

We forecast Mobile Services revenue to grow at a 3-yr CAGR of 5% through FY28e,

underpinned by price increases with SIOs expected to be flat. We see downside to

VA consensus SIO estimates in 2H26e as the second price increase in under 12 Price Performance

months is likely to drive elevated churn. We are slightly ahead on Mobile revenue due

(RIC: TLS.AX, BB: TLS AU)to stronger ARPU growth. We also expect higher-than-expected spectrum costs to

reinforce industry’s pricing discipline and support continued price increases.