Telstra can’t take a trick at the moment. Dividend cuts (which seemed prudent), increased competition and weakening margins saw the shares hammered lower earlier this month.
Yesterday the shares fell more than 6% after they went ex-dividend, and the telco revealed that it had been forced to drop a plan to raise $5.5 billion by selling income it receives from the NBN, the government-owned broadband network.
In a short statement, Telstra said the National Broadband Network refused to support its proposal to securitise its income to be received from the NBN.
Announcing a new dividend policy with the annual results earlier this month, Telstra had said it planned to create a separate investment company into which up to $5.5 billion would be securitised for investors.
This amount would have been 40% of the recurring income Telstra expects to get for leasing its fibre and exchanges to NBN Co on a 30-year lease.
“The scale of the proposed transaction is approximately $5 billion to $5.5 billion with Telstra to retain some equity interest,” Telstra CEO Andy Penn said when announcing the proposal.
"Our intention would be to use the proceeds to reduce debt by around $1 billion, with the balance to support a capital management program to enhance shareholder returns, most likely through a series of on-and-off market buybacks."
While the proposal had been “well progressed and supported by equity and debt investors, Telstra has been advised this morning that technical consents from nbn co will not be forthcoming,” the company told the ASX on Wednesday.
But the according to the statement from the NBN, it said said it couldn’t see how nbn’s position can be protected/improved by Telstra’s securitisation plan.
"Essentially we can’t see how NBN’s position can be protected/improved by Telstra’s securitisation plan especially given the unpredictability of our operating environment in the 2020s," NBN said in Telstra’s ASX statement. That means the future earnings black hole is still there. Will Telstra be tempted into a major acquistion to compensate?