Citi believes the future for 5G is bright, with incremental revenue from new business, particularly in the enterprise segment. However, most services will need much higher bandwidth and this cannot be delivered until additional spectrum becomes available, expected in FY21-22.
The broker suggests, once more spectrum is available, 5G will have bandwidth to provide a real fixed-line substitute. However, fixed-line substitution is considered a product that is really only practical for low-usage customers.
Telstra has repeatedly stated it will not use mobile as a substitute for fixed-line broadband as the capital required to provide this at scale is excessive. The broker retains a Sell rating and $2.50 target.
Sector: Telecommunication Services.
Target price is $2.50.Current Price is $3.04. Difference: ($0.54) – (brackets indicate current price is over target). If TLS meets the Citi target it will return approximately -22% (excluding dividends, fees and charges – negative figures indicate an expected loss).