Telstra (ASX:TLS) share price struggles despite Department of Defence contract renewal

A Department of Defence personnel in the field talks on a mobile phone.

The Telstra Corporation Ltd (ASX: TLS) share price is standing firm on Wednesday morning. This is despite the Australian telecommunications giant announcing the renewal of a large contract with the Department of Defence.

In early trade, shares in the telco are trading at $3.90, the same as at yesterday’s close.

Telstra secures an important contract

In news that could give the Telstra share price a boost, the tenth-largest S&P/ASX 200 Index (ASX: XJO) constituent announced an important contract renewal.

According to the release, the company has reached an agreement with the Australian Department of Defence to continue delivering critical network and telecommunications services.

The renewed contract will span the next 5 years and is worth over $1 billion. As part of this agreement, Telstra will provide the Department with its range of telco solutions and technology. Additionally, the Department of Defence will have the option to extend the contract by up to 3 years.

Furthermore, Telstra’s side of the deal will see a significant increase in wireless coverage via a Wi-Fi 6 rollout program. This relatively new Wi-Fi protocol is a much more efficient protocol, upping potential connection speeds from 3.5 gigabit per second (Wi-Fi 5) to 9.6 gigabit per second. At the same time, Telstra’s 5G mobile network will be made available to all Defence personnel.

In addition, the telco giant will provide full SD-WAN (software-defined wide-area network) and SDN capabilities. In turn, this will enable a more flexible, self-healing, and predictive network. The Telstra share price has barely managed to waver, despite this news.

Management commentary

Commenting on the major contract renewal, Telstra CEO Andrew Penn said:

We are very pleased to extend and deepen our partnership with the Department of Defence and use our unique sovereign capabilities, decades of experience, and cutting-edge technology to co-design solutions for today and into the future.

Telstra is committed to working with the Australian Government to ensure a thriving and safe digital economy and society, including ensuring the Department of Defence and Australian Defence Force have access to world-leading technology.

Moreover, management highlighted this contract as a piece of the puzzle contributing towards the company returning to growth. In fact, the deal is the largest customer contract of its kind signed by Telstra Enterprise in its history.

Finally, the Telstra share price is up 30% year to date, bringing its market capitalisation to $46.38 billion. In other words, it has been a good year for Telstra shareholders so far.

The post Telstra (ASX:TLS) share price struggles despite Department of Defence contract renewal appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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