Telcos turmoil 5G benefits in doubt as Telstra takes a hiding
DOUBTS have been raised over the 5G revenue bonanza Australian telcos are waiting for, just as Telstra reels from a market rout which has stripped close to $ 4 billion from its market value.
Shares in the nation’s biggest telco notched up another 5 per cent plunge yesterday, taking them below $ 3 for the first time since late 2011.
Telstra has been savaged by investors following a weak earnings update with $ 3.68 billion wiped from its market capitalisation since the start of the week.
And things could get worse for Telstra’s mum and dad shareholders with Citi analysts tipping the telco could again cut its dividend next year.
The head of Chinese technology giant Huawei has also cast doubt on a revenue windfall from 5G, in comments which question future revenue flows for the entire mobile sector.
Eric Xu last month said while 5G was faster and more reliable than 4G, consumers would find no “material difference between the two technologies” and that “even today we have the technology that can support autonomous driving”.
Telstra has been tipping a revenue boost from the new “fifth generation” mobile technology which is supposed to be three times faster than 4G.
In sounding a warning on Telstra’s dividend, Citi analyst David Kaynes said 5G could offer Telstra “cost savings” as it was more efficient than 4G.
But he said Telstra would be forced to pass on any savings to the consumer due to high competition with the likes of Vodafone, Optus and an incoming TPG.
Mr Kaynes said it no longer made sense for Telstra to pay a 22c dividend after the close of the financial year due to limited scope for revenue growth.
In February, Telstra withheld $ 500 million after cutting its dividend for the first time in 16 years.
Despite facing more headwinds, Telstra on Monday reaffirmed its total dividend for the full year to be 22c, fully franked.
The mum and dad shareholder stock is under siege after on Monday revealing earnings before interest, tax, depreciation and amortisation will come in at the bottom end of its full- year guidance range of $ 10.1 billion to $ 10.6 billion.
These challenging trading conditions are expected to continue in financial year 2019, it said.
Other telco stocks were similarly whacked this year amid a malaise in the sector, with TPG and Vocus both down about 20 per cent since early January.
Telstra’s chief operating officer Robyn Denholm said the possibilities of 5G went beyond purely smartphones and would underpin much of the economy. “5G will help deliver the next industrial revolution, unlocking opportunities across industries and markets and we want to ensure Australians are among the first in the world to gain access to it,” Ms Denholm said.
Telstra chief Andy Penn at the telco’s February half year results, talked up the impact of 5G and how it could provide a revenue boost.
“When there’s been a new ‘ G’, that has been followed by growth in industry revenues as customers have taken advantage of more capacity and more speed,” he said in February. “It’s not unreasonable to think that will be the case with 5G.”
Shares in Telstra lost 5.6 per cent yesterday to close at $ 2.87. They have lost 10.6 per cent since Monday.