In key news on Australian stocks, Telstra Group Limited (AU:TLS) announced plans to lay off 2,800 workers for the overhaul of its business operations. With this move, the company commenced the transformation of its Enterprise business as part of its comprehensive review announced along with its first-half results in February.
The market reacted negatively to the update, with Telstra shares trading down nearly 2% at the time of writing.
Telstra Group is an Australian telecommunications company offering a diverse range of communication and technology services. Its mobile segment is the nation’s largest based on user base and coverage.
Telstra’s Cost-Saving Measures
As part of its in-depth review of the enterprise business, Telstra has been simplifying its product portfolio, improving customer service, and refining the business’s cost structure.
These changes may result in the elimination of up to 2,800 roles, with the majority anticipated to take place by the end of December 2024. Out of these layoffs, consultation on 377 jobs would start now. The company anticipates that it will incur one-time restructuring costs in the range of AU$200 million to AU$250 million between FY24 and FY25.
Through these measures, Telstra expects to reach AU$350 million of its T25 cost reduction goal by the end of FY25.
Along with these changes, the company eliminated the CPI-linked annual price review for its post-paid mobile plans to simplify its pricing strategy. Analyst Lucy Huang from UBS mentioned the CPI indexation removal as a “key surprise” in the update.
Telstra’s Favourable Outlook
In the update, Telstra also confirmed its full-year guidance for FY24, with confidence in strong mobile business subscriber growth. The company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) growth has remained strong so far in the current Fiscal Year, highlighting the robust demand for its products.
Additionally, the company provided underlying EBITDA guidance of $8.4 billion to $8.7 billion for FY25. The company stated that strong mobile revenues, reduced costs, and a simplified Enterprise business have supported its EBITDA guidance for FY25.
Is Telstra a Good Stock to Buy?
According to TipRanks, TLS stock has received a Strong Buy rating, backed by three Buy recommendations. The Telstra share price target is AU$4.46, which represents 23% upside potential from the current price level.
