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· Posted on
February 21, 2024

Telstra shareholders have approved the family break up to divide and conquer

Telstra's CEO planned to split the biz into three... and now, it has been approved by the shareholders.

What's the key learning?

  • Telstra’s CEO planned to split the business into three discrete parts under a new, majority-owned company Telstra Group consisting of InfraCo Towers, InfraCo Fixed, and ServeCo.
  • Telstra's shareholders have approved the split and it will now allow Telstra to extract much more value from each company.
  • The break up gives each individual part more flexibility for partnerships, investment, or even a sale.

👉 Background: Most of us know Telstra for its mobile, landline and broadband businesses, but it also owns a fair bit more. We're talking all the non-sexy, non-customer facing stuff behind the scenes.

👉 What happened: In late 2020, Telstra’s CEO planned to split the business into three discrete parts under a new, majority-owned company Telstra Group.

  • Company 1: InfraCo Towers (mobile towers)
  • Company 2: InfraCo Fixed (fixed-line assets)
  • Company 3: ServeCo (the mobile biz)

👉 What else: Although it was announced back in 2020, it has now been approved overwhelmingly by Telstra shareholders. This split will allow Telstra to extract much more value from each company.

What's the key learning?

💡Breaking up a company may not materially change the company, but it can materially change its value.

💡Telstra, and all its parts today, is currently worth around 6 - 8x its EBITDA. That means its worth 6 - 8x its earnings before interest, tax, depreciation and amortisation.

💡But some of the other parts of Telstra, like the infrastructure, could be valued at much more.. even up to 20 - 30x its EBITDA. So this break up gives each individual part more flexibility for partnerships, investment or even a sale.

‍

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