TLS

[Snoopy]

This post is bringing together the results of the four Buffett Tests that I have detailed in posts 16,17,18,28 and 29 on this thread. Telstra:

BT1/ PASSes the significant size and market position test,
BT2/ FAILs the increasing normalised earnings test over five years,
BT3/ FAILs the return on shareholder equity test (never comes close to the required return on equity hurdle of 15%) and
BT4/ PASSes the ability to raise profit margin test.

If Telstra manages to increase their normalised profits for FY2023, then the 'fail ' grade of test BT2 will turn into a pass.

However, I am of the opinion that Telstra is unlikely to ever earn the hurdle return on shareholder equity that Buffett requires in BT3/ (15%). My reasons for this may be found on the TEL vs TLS thread on the NZX forum, but are particularly highlighted in this post.

https://www.sharetrader.co.nz/showth...=1#post1008165

The summary: Telstra has an inherently higher cost asset base, even adjusted for the respective population difference between Telstra in Australia and the equivalent incumbent Spark in New Zealand. (In contrast to Telstra, Spark clears the 15% return on equity criterion that Buffett sets every year for the last five years easily). If Telstra is unlikely to ever fulfill all of the four qualification hurdles to be a Warren Buffett style investment, does that mean Telstra is un-investible? Of course not. It just means we need to look at alternative investment models to justify an investment in Telstra.

A starting point is the 'capitalised dividend valuation model' (link to post 31 below):
https://www.sharetrader.co.nz/showth...=1#post1003252

This is showing a fair value share price of $3.09. This valuation is driven by dividend rates of recent years being lower than dividend rates today. But the capitalised dividend valuation model is also a zero growth valuation technique. If Telstra is genuinely growing their earnings, then a 'capitalised dividend fair value' price will undervalue the company. So does a credible earnings growth plan for Telstra exist? The two most trumpeted potential 'growth candidates' are 'Telstrahealth' and 'Mobile'.

I address the initiative of Telstrahealth (post 40) and conclude that in the medium term, this is likely to continue to be loss making. Nevertheless Telstrahealth may reduce my estimate of its annual loss from an EBITDA of -$193m to zero by 2025. In relation to FY2022 profit, this may increase EBITDA earnings by: $193m/$1,645m= 11.7% over 3 years (or $193m/3= $64m/year).

Inflation adjusting mobile phone price plans, upping prices by 7% - but with half of that increased reflecting higher Telstra costs-, going through, without significant customer churn (post 39) looks do-able. This could increase profits by: 0.5x0.07x $9,470m= $331m per year.

So both of these growth initiatives together might increase FY2024 EBITDA (or in this particular case NPAT, which is much the same thing) by: 0.7x(2x$64m+$331m) / $1,645m = 20% over FY2022 levels. Such a level of profit growth should be directly reflected in share price growth. We can modify our capitalised dividend valuation model price target to reflect that:

$3.09 x 1.2 = $3.71

Yet that price does not reflect the benefits of the Amplitel sell off (a 5% eps lift, see post 45), nor a potential sell off of InfraCo assets (an 11% eps lift, see post 50). Adjusting for those gives a new fair value share price of:

$3.71 x 1.05 x 1.11 = $4.32

As it happens $4.32 is the exact share price that Telstra closed at, as of the close of business on Friday 24th June 2023 last week on the ASX! That I should come up with a market valuation on a share as well and widely researched as Telstra in accordance with 'Mr. Market' is no great surprise. But 'getting the price more or less right' is much less important than understanding the drivers of that price. In this instance it looks like the forecast profitability increases from the company's identified growth engines of Mobile and TelstraHealth are already priced in, as is the beneficial eps effect and consequential debt reduction on the sale of a minority interest in Amplitel and in the near future certain InfaCo assets. Given that there is 'execution risk' associated with all of these potential events, this indicates to me that Telstra is fully priced at $4.32. As a new investor today, I would be looking to get a bit of a share price discount reflecting these 'yet to be baked in 'earnings per share' profit rises, (as reflected in that $4.32 share price). That means looking for an entry price of less than $4. Taking another perspective, should positive announcements drive the Telstra share price 10% higher than my fair value, to say $4.75, that might be a good target price for trimming your holding.

SNOOPY

[peat]

As it happens $4.32 is the exact share price that Telstra closed at, as of the close of business on Friday 24th June 2023 last week on the ASX!........

I think that's awesome

... should positive announcements drive the Telstra share price 10% higher than my fair value, to say $4.75, that might be a good target price for trimming your holding.

SNOOPY

Yes I've thought about selling in the mid-high $4.00's but it hasnt really got there

and looking at that recent peak of $4.42 and subsequent sell off I dont think it will for a while.

[peat]

Not selling the cell towers

https://www.theage.com.au/business/companies/telstra-boss-rogue-move-could-define-her-legacy-at-the-telco-20230817-p5dxay.html?utm_source=ST&utm_medium=email&utm_cam paign=ShareTrader+AM+Update+for+Friday+18+August+2 023

[Snoopy]

Not selling the cell towers

https://www.theage.com.au/business/c...18+August+2023

No, you have misinterpreted the Age article Peat.

The article says the sale of 'Infraco' (which houses Telstra’s ducts, fibre, data centres and exchanges) has been put on ice. The cell towers are in a different entity 'Amplitel', and Telstra has already flogged off 49% of that. (IOW the cell towers have already been sold, albeit not down to the same level that Spark in NZ has done.)

Telstra seems content with the Amplitel strategy. From p5 of the full financial year 2023 results address:

"Finally, we continue to demonstrate the growth potential of our infrastructure through Amplitel. It grew EBITDAaL by 9.2% from increasing tenancy on new towers and strong demand from new tenants for existing towers."

"With over $2 billion in long-term contracts signed, we are excited about the future of this business. Given this performance, we see Amplitel EBITDAaL CAGR increasing from low-to-mid single digit to mid-to-high single digit to FY25."

There was talk that Telstra might sell some of their other Infrastructure assets in a similar deal to the Amplitel one. It is this transaction that has been put on ice - nothing top do with cell towers. I expect the freezing of any sale of shares in Infraco will be a short term negative for the Telstra share price. Sharemarket punters will not be getting the sugar hit of an extra capital injection9and hence special dividend?) that they expected.

However, it is probably positive news for longer term investors. From that Age reference you gave:
"Five years on and the booming movement to the cloud and hyper-demand for the next generation of AI drives the use of InfraCo’s infrastructure assets. This business began to look less like a low-growth utility and more like a business with stronger growth prospects."

"Already Brady has begun investing in the network through the development of intercity fibre and has plans for more data centres and edge computing infrastructure to increase capacity and improve latency. In other words, make it fit for purpose to accommodate the changing needs of customers."

"Brady hasn’t ruled out the possibility of selling it down the track, but she sees better value in renovating it first and quite possibly a fatter sale price as well."

SNOOPY

[peat]

ok thanks for the correction Snoopy.

[Snoopy]

Information on Telstra's borrowings may be found under note 4.4.1 in the annual report. The borrowings are split between unsecured notes, unsecured bank and other loans and unsecured commercial paper. There is no detail given as to who these loans are with, nor any specifics about loan maturity dates (apart from a current and non-current disclosure). That the detail reporting is so sparse, compared to the likes of the Spark annual report where all loans are laid out in great detail as regards size and maturity, I find odd. Different accounting disclosure requirements on each side of the Tasman? No matter. The information I need is there (supplemented by information from the half year report).

	FY2022	HY2022	FY2021
Current Liabilities	$2,690m	$4,129m	$3,631m
Non Current Liabilities	$8,292m	$8,003m	$10,505m
Total	$10,982m	$12.132m	$14,136m

By averaging the three totals, I get a triangulated approximation to the average loan balance during the year.

($10.982m+$12,132m+$14,136m) / 3 = $12,417m

The total loan interest bill for the year was $444m (AR2022 p100)

This gives an implied average interest rate over all borrowings for year FY2022 of: $444m / $12,417m = 3.58%

They say the more secure your revenue base, the greater debt burden your company can support. Utility companies, like Telstra, fall into this category. But that still doesn't exempt utility companies' cost of borrowed funds rising a lot more than predicted. What effect did rising interest rates have at Telstra over FY2023? The answer is under the header 'net finance costs' on p27 in AR2023.

"The average gross borrowing rate increased from 3.7% to 4.6%."

I found that quite encouraging in the sense that my linear 3 point approximation that I used to calculate the approximation to this figure (see quoted text) was not far out, at 3.58%. So how close did my linear approximation technique come to estimating the overall debt borrowing rate over FY2023?

	FY2023	HY2023	FY2022
Current Liabilities	$2,662m	$3,988m	$2,690m
Non Current Liabilities	$10,013m	$8,894m	$8,292m
Total	$12.675m	$12,882m	$10,982m

By averaging the three totals, I get a triangulated approximation to the average loan balance during the year.

($12,675m+$12,882m$10.982m) / 3 = $12,180m

The total loan interest bill for the year was $570m (AR2023 p110)

This gives an implied average interest rate over all borrowings for year FY2022 of: $570m / $12,180m = 4.68%

That is close to the 4.6% rate quoted by Telstra itself, so a good approximation. Particularly in the context of that one off Amplitel sale money moving into the company Large one off payments have the potential to disrupt linear averages like the one I calculated.

SNOOPY

[Snoopy]

The Australian federal government via nbn (the National Broadband Network), the vehicle set up to develop broadband across the Australian nation, has been, -year by year-, 'buying out' the existing Telstra owned largely copper telecommunications network via annual payments. The rolling network buyout payments have been recorded in the income statement of Telstra as part of the total income under 'other income'. This buyout process is now winding down to completion. These payments were legitimate income 'in the day'. But it is my belief that to give an informed comparative picture of the business going forwards, these payments should be removed from 'normalised income'. This post is an exercise to show how that is done.

1/ Line Migration Revenue Part 1: Network disposal compensation to Telstra

Telstra has been receiving money, -in effect from the federal government-, to dispose of their legacy fixed line network to the federal government owned nbn (National Broadband Network). This money is classified as an IOP or 'Infrastructure Ownership Payment', and is made under the ISA or 'Infrastructure Services Agreement' between Telstra and nbn. These IOP payments are classified as part of 'other income' in the Telstra income statement. This 'annual IOP (payment)' is itemized in note 2.2 of each of the last few years of annual reports under "disconnection fees". Subsequently Telstra becomes a retail provider selling broadband on behalf of the nbn, the network owner and wholesaler.

(Special note: These IOP payments are not to be confused with IAP 'Infrastructure Access Payments', classified as sales revenue. IAP payments are part of a future ongoing income stream to Telstra, as nbn pays Telstra for access to Telstra owned ducts and pits.)

2/ Line Migration Revenue Part 2: End line customers billed by Telstra to move to nbn

On top of the 'network disposal money' received, Telstra charges their customers to move from their existing network arrangements to 'nbn', under the description 'one-off income we receive from customers to connect to nbn'. These customer 'disconnection from legacy and connection to nbn' fees (column 1 in the table below) are not distinctly disclosed. However it is possible to work them out by subtraction.

a/ Take the 'total nbn income' (e,g. for FY2022 from AR2022 p25: $376m) (figure transferred to table column 3 below)
b/ Subtract from that, the component paid by nbn (e.g. for FY2022 from AR2022 p90: $329m) (figure transferred to table column 2).
c/ The Telstra charged 'connection fee' to nbn is your answer

The 'total nbn income' may also be found at the front of the respective annual reports in the "Full year results and operations review.", in the 'Product Income' table, as part of the 'Product Performance' graphic (AR2021 onwards). (I cannot find this information directly in earlier reports. However, it can be calculated by adding columns 4 and 5 in the table below).

End of the line migration process

Both of the above two line migration income streams are set to become less important over time.
From the FY2019 annual result presentation, slide 5:
"We expect one off nbn DA (for Definitive Agreement revenue) and nbn 'costs to connect' to reduce to zero over time as migration to nbn completes."

Normalising Telstra Revenue

Since these income streams are non-recurring for each customer, I need to take the total tabulated nbn migration revenues off the total declared Telstra revenue. This will normalise the revenue (and hence income in this instance as well, as explained below) figures.

If we are to remove a stream of income, it follows that we should also remove any expenses that are specifically incurred in earning that income stream. Thus we have the latter two columns of the table. IMPORTANT CONCEPTUAL POINT: There is no depreciation, amortisation or interest charges set off against these nbn revenue payments. So in this instance 'Change in EBITDA' = 'Change in NPBT'. This so called 'Removed EBITDA' may be found in the 'Reference Tables' towards the end of each respective report (back to AR2020) in the 'Underlying EBITDA' calculation table (e.g. AR2022 p170). It is described as 'Net one off nbn receipts'. I have put these numbers in column 5 of the table below.

nbn transition Telstra income & expenses	Customer Connect fee to nbn (calculated)	plus DA agreement (1) payments from nbn	equals Total nbn Income	less One off DA (1) & nbn Cost to Connect (C2C)	equals Removed EBITDA (2)
FY2023	$3m	$69m	$72m	$35m	$37m
FY2022	$49m	$329m	$378m	$145m	$233m
FY2021	$28m	$1,022m	$1,050m	$248m	$802m
FY2020	$283m	$1,721m	$2,004m	$468m	$1,536m
FY2019	$505m	$1,611m	$2,116m	$503m	$1,613m
FY2018	?	$1,779m	use $2,297m	$518m	use $1,779m (3)

Notes

1/ "DA agreement" is the so called 'Definitive Agreement' that outlines how Telstra will transition from their "in-house legacy network" to the government owned nbn or 'national broadband network.' Otherwise known as 'nbn disconnection fees', they are listed under 'other income' in AR section 2.2. There is a cost incurred to Telstra in facilitating this transition (fourth column in table above). These costs may be found in the breakdown of 'operating expenses' in the "Full year results and operations review" section in the "operating expenses table" at at the front of each report (e.g. AR2022 p26).

2/ The 'Removed EBITDA' figure is from the underlying EBITDA calculation found in the 'Reference tables' at the back of each annual report. The figure I have used is 'Net One off NBN Receipts' which is more finely defined as 'net nbn one off Definitive Agreement receipts, consisting of Per Subscriber Address Amount' (PSAA) and Infrastructure payments, offset by the nbn cost to connect expenses. In this instance the removed EBITDA is the same as the removed NPBT.

3/ Why have I tabled estimated figures for FY2018? There was no total 'nbn income' figure offered up in AR2018. But If you look at FY2019, the first year all the information that I was after was available (albeit retrospectively from the FY2020 report), you will see that the 'Cost to Connect Fee' ($505m) and the actual costs incurred making the connection ($503m) were almost the same. I expect the situation was similar over FY2018 Little difference between the two analagous comparative figures). As long as income is only just covering costs, it makes no difference to the overall profitability picture of the company. And furthermore, in the early days of the nbn fibre roll out, there would be no reason to think that a 'network switchover' was a 'profit opportunity going begging'.

If the 'customer connection fee' and the 'background costs to do the job' are roughly equal, that means the Definitive Agreement nbn payment received will be a close approximation to the EBITDA (and in this instance NPBT) lost. So although unlikely accurate to the last dollar, $1,779m will be close enough to the real undeclared NPBT lost.

SNOOPY

[Snoopy]

The purpose of this post is to provide an input to allow us to normalise earnings across a period where there was a significant accounting rule change (the adoption of AASB16, the Australian equivalent of NZIFRS16).

Telstra adopted AASB16 for the FY2020 accounting year. Telstra have chosen to use the 'modified retrospective adoption approach' (AR2020 p88). This means the comparative results for FY2019 have not been restated, Instead the balance sheet was adjusted, in terms of listing the quantum of retained earnings as at 01/07/2019 (the start of FY2020) to mirror the cumulative effect of historically applying this standard. To compare the results from FY2018 and FY2019 with newer results, we can adjust the newer results to reflect what would have been reported if AASB16 had never been adopted as the reporting rule going forwards.

At this point I need to remind readers that the total profit over the years, booked by Telstra from utilising a leased asset (like a rental premises) is not changed by accounting reporting rules. Instead the effect of AASB16 is to shift profitability between reporting years, not to change the 'all of contract' leasing profitability picture.

An increase/decrease in expenses from adopting AASB16 for a selected year, will result in a decrease/increase in profit for that year.

	Expense	FY2020	FY2021	FY2022	FY2023	Reference
Using Post AASB16 rules	Depreciation of right-of-use assets	$1,017m	$726m	$587m	$574m	(AR Note 2.3 'Expenses')
	add Interest on lease liabilities	$109m	$83m	$78m	$99m	(AR Note 2.3 'Expenses')
		$1,126m	$809m	$665m	$673m	(Total)
Using Pre AASB16 rules (based on Cashflow)	less Lease Finance Payments (principal portion)	($993m)	($706m)	($697m)	($675m)	(AR 'Statement of Cashflows')
	equals NPBT Profit Increment on adopting AASB16	($133m)	($103m)	$32m	($2m)	(Total)

SNOOPY

[Snoopy]

The last few years have seen Telstra dividends 'beefed up' by federal government payments as Telstra's long standing legacy nationwide network is 'signed over' to new management in the Federal Government controlled 'National Broadband Network'. Management have been quite up front about doing this, even splitting their dividend into 'ordinary' (from normal operations) and 'special' (as a result of nbn payments) parts. However the nbn party for dividend hounds has now come to an end. This is why this dividend analysis has been 'adjusted' to take out the special (nbn funded) components of historical dividend record.

Gross dividends in Australia are made up of a net payment plus a franking credit (if the said company we are looking at is paying Australian tax). As New Zealand residents and Telstra shareholders, we kiwis are not entitled to claim these franking credits as 'tax paid' in New Zealand. However the vast majority of Telstra shareholders are Australian, and it is clearly Australian interests that are driving the TLS share price. For this reason I am doing this analysis from an 'Australian perspective', and that means I assume franking credits are claimable. We kiwi shareholders may not get the franking credit value from our dividends. But if we kiwi shareholders want to sell, it will be Australian interests that determine what a fair share price will be.

Note that the Australian company tax rate is 30%.

Year	Dividends as Declared	Gross Dividends	Gross Dividend Total
FY2019	7.5c + 5.0c	10.71c + 7.14c	17.85c
FY2020	5.0c + 5.0c	7.14c + 7.14c	14.28c
FY2021	5.0c + 5.0c	7.14c + 7.14c	14.28c
FY2022	5.0c + 6.0c	7.14c + 8.57c	15.71c
FY2023	7.5c + 8.5c	10.71c + 12.14c	22.85c
Total			84.97c

Now we have to select a representative capitalisation rate. For Spark I have decided a rate of 6.5% is appropriate. Telstra is now a very similar company to Spark (both are incumbant operators that have had their former fixed line monopoly networks de-merged). But Australian interest rates have traditionally been a little lower than ours. So I would judge a gross return rate target of 5.5% to be more applicable for Telstra shareholders in the so called West Island.

The five year average historical gross income rate for Telstra is: 84.97/5 = 17.0c

Using an interest capitalisation rate of 5.5%, this equates to a Telstra share price of: 17.0 / 0.055 = $3.09. Telstra shares are trading today at price of $4.34. On that basis, Telstra shares are currently significantly over-valued, by about 40%. But what readers have to remember is that 'capitalised dividend value' is a 'no growth' method of valuation. Underlying earnings at Telstra have grown significantly over the current year.

If instead we just use the last twelve months of dividends to look back on, then the capitalised dividend valuation changes:

22.85/ 0.055 = $4.15

My interpretation of this is that Mr Market is telling us the recently elevated level of dividend is not only sustainable, but might be expected to grow a little. But is that true? Of will earnings 'revert to the mean'? Know the answer to those questions, and you will know if TLS is currently trading at a fair market value, given its business outlook.

Once again I have historically adjusted out dividend payments to remove 'special dividends' that were funded by one off nbn (National Broadband Network) compensation payments. These were made to Telstra for handing over their existing largely copper network to nbn, a process that is now largely complete. It was important to remove these special dividends from this forecasting tool, because they are entirely historical, and do not reflect future dividend potential from Telstra.

Gross dividends in Australia are made up of a net payment plus a franking credit (if the said company we are looking at is paying Australian tax - which Telstra does). As New Zealand residents, we kiwis are not entitled to claim these franking credits as 'tax paid'. However the vast majority of Telstra shareholders are Australian, and it is clearly Australian interests that are driving the TLS share price. For this reason I am doing this analysis from an Australian perspective. We kiwi shareholders may not get the franking credit value from our Australian dividends. But if we kiwi shareholders want to sell, it will be Australian interests that determine what a fair share price will be.

Note that the Australian company tax rate, which I have used for grossing up dividends, is 30%.

Year	Dividends as Declared	Gross Dividends	Gross Dividend Total
FY2019	7.5c + 5.0c	10.71c + 7.14c	7.14c
FY2020	5.0c + 5.0c	7.14c + 7.14c	14.28c
FY2021	5.0c + 5.0c	7.14c + 7.14c	14.28c
FY2022	5.0c + 6.0c	7.14c + 8.57c	15.71c
FY2023	7.5c + 8.5c	10.71c + 12.14c	22.85c
FY2024	8.5c + ?c	12.14c + ?c	12.14c
Total			86.4c

Now we have to select a representative capitalisation rate. For Spark (the nearest NZ equivalent company both are incumbant operators that have had their former fixed line monopoly networks de-merged), I have decided a rate of 6.5% is appropriate. But Australian interest rates have traditionally been a little lower than ours. One way to pick an acceptable equity return rate is to look at the market trading interest rate of any listed company bonds and pick something a bit higher, to account for 'equity risk'

Telstra have the following company bonds listed on the ASX market:
TL1HAA €500m 1.00% Notes maturing 23 April 2030;
TL1HZ: €600m 1.375% Notes maturing 26 March 2029; and
TL1HY: €750m 1.125% Notes maturing 14 April 2026.

When I put these tickers into 'Stocknessmonster', I get a complete blank on both the buy and sell side. So there is no indication as to what market rate (which I suspect will be above the coupon rate) these bonds are trading at!

Never Mind. I would judge a 'gross return rate target' of 5.5% to be more applicable for Telstra shareholders in the so called West Island.

The five year average historical gross income rate for Telstra is: 86.4/5 = 17.3c

Using an 'interest capitalisation rate of 5.5%', this equates to a Telstra share price of: 17.3 / 0.055 = $3.15. Telstra shares are trading today at price of $3.87. On that basis, Telstra shares are currently significantly over-valued, by about 23%. But what readers have to remember is that 'capitalised dividend value' is a 'no growth' method of valuation. Underlying earnings at Telstra have grown significantly over the current year. Any overvaluation might be better considered as a 'deserved growth premium'.

If instead we just use the last twelve months of dividends to look back on, then the capitalised dividend valuation changes:

24.28c/ 0.055 = $4.41

I think the market discount to that $4.41 price (a turnaround on the premium the market was offering to my historical yield of 6 months ago) might be a reflection of the cancelled InfraCo sell-down, from which salivating investors were expecting a quick capital injection. But even so, trading at $3.87, I believe there is a modest growth path priced into the Telstra share price. And with the purchase of 'Versant' announced today, a cloud technology NAS (Network Application and Services) business, we have another 'clip on' should add to that 'growth potential'. This latest Versant acquisition builds on previous acquisitions, most recently of Alliance Automation and Aqura Technologies, which are bolstering subsidiary Telstra Purple’s capabilities to support the end-to-end needs of industry covering network, security, cloud, collaboration, mobility, software development and design, data and AI.

In summary, from a yield perspective alone, Telstra is not cheap, but nor is it obviously overvalued. Whether that growth potential is enough to tick the value investor box at $3.87 is a decision that will require some more work.

SNOOPY

[Snoopy]

In summary, from a yield perspective alone, Telstra is not cheap, but nor is it obviously overvalued. Whether that growth potential is enough to tick the value investor box at $3.87 is a decision that will require some more work.

Someone else is interested in how Telstra will grow in the medium to longer term. Analyst Scott Ryan at the FY2023 results presentation asked:
"I was wondering if you could tell us, just as you look around the globe and your travel, on a three to five year time-frame, are there any specific geographies or players with really interesting services that you seek to emulate for the medium term, please?"

And Telstra CEO Vicki Brady answered as follows:
"What a great question; taking the longer run view actually. That’s part of the work we’re doing at the moment, looking out that five year, and even 10 years out: what are some of the trends that are going to underpin and are going to be important for that long run sustainable growth in our business? Look, we talk to and engage with lots of our peers around the world, as well as other technology companies around the world. And there’s not a specific service I would call out that I’ve seen out there. But absolutely, I think the thing that everyone is talking about – and certainly in conversations I’m in with business leaders here in Australia at the moment – everyone can see this incredible potential with this next stage of what AI will deliver. I think generative AI has certainly opened up AI now as very, very mainstream, not something that is sitting in the background. So that’s why, for us, things like our venture with Quantium (1), making sure we’re at the forefront of how we adopt these technologies in our business, but also work with our customers to help enable them on the technology front."

"And I think it’s important to remember as all of that demand for that technology is out there, it needs really great connectivity. So that foundational piece of all of the infrastructure and network that needs to be there, which goes hand in hand with the views and what I’ve talked about with InfraCo Fixed; it’s such foundational infrastructure for the country where we really do see where technology and services are evolving to. It’s only going to generate more demand for that infrastructure, which we already have strong demand for today. So they would be some of the areas I would point to. And obviously, we engage and keep at the forefront of understanding what’s happening around the world, so we can bring those things to Australia as soon as we can and have Australians getting access to that technology right amongst the first few countries in the world, as we did with 5G. So thanks for your question, Scott."

(1) Telstra and Quantium arrangement: https://quantium.com/quantium-telstra-media-release/ Quantium is is a trans-continental data analytics company with offices in Australasia, the United States, India, Great Britain and South Africa

------------------------

My own view is that tech companies like to talk, but the actual future is likely to be more prosaic. Apart from the press release I saw no mention of Artificial Intelligence per se as a future profit engine on the Quantium website. Talk can pump the NVIDIA share price up to a PE of 112. But making the profits to justify that heady value is another matter. NVIDIA fans paint a picture of global domination of this technology by NVIDIA, with all the downstream applications surfing on their patents and first mover advantage. If you believe that, Telstra will be battling to lap up AI market share from discarded droplets of the downstream wake of NVIDIA. That doesn't sound like a big contribution to the Telstra profit puddle going forwards to me.

SNOOPY