The Telstra Corporation Ltd (ASX: TLS) share price is making early gains after management outlined details of its restructure to unlock “additional value to shareholders”.
Under the plan, shareholders in the country’s largest telco will swap their shares in Telstra Corporation for Telstra Group Limited.
The Telstra share price is currently up 0.9% to $3.905 in morning trade. For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.76%.
Telstra’s four new entities
The Telstra share price is gaining after the telco revealed the restructure would result in a new holding company — Telstra Group Limited. This will in turn control four divisions — InfraCo Fixed, Amplitel, Telstra Limited, and Telstra International.
InfraCo owns the fixed infrastructure like poles and wires. Amplitel owns the mobile phone towers, in which Telstra sold a 49% stake for $2.8 billion. The sale was part of its T22 strategy announced in 2018 to realise value for investors.
Telstra Limited will be the customer-facing service arm of the group, while Telstra International owns assets like subsea cables.
Management has taken steps to establish InfraCo as a standalone business. This includes intercompany agreements developed between InfraCo and Telstra Limited to “support strong and sustainable earnings for both entities”.
The move will also make it easier for Telstra Group to divest or spin off InfraCo at a later stage to crystallise further value for shareholders.
But there are a few more steps Telstra needs to make to complete the restructuring. This includes getting approvals from the Australia Competition and Consumer Commission as well as the courts.
Legal hurdles
“Telstra is using a Scheme of Arrangement to implement key parts of the restructure as the most practical and efficient way to create the new Telstra Group,” said the company.
“The restructure involves the transfer of assets and liabilities within entities of the Telstra Group, and the Scheme of Arrangement will enable those assets and liabilities to be transferred by order of the Court.”
Once the new entity is in place, Telstra wants to put its international business under a separate subsidiary. This is to keep that business together as one entity within the Telstra Group.
When will the new Telstra share price start trading?
Telstra will also need to renegotiate its contracts with NBN Co (the owner of the national broadband network). This is where the ACCC approval comes in to ensure the new agreement is authorised under competition law.
Assuming everything goes to plan, Telstra Group shares will start trading on the ASX by the end of October 2022.
The Telstra share price has jumped 15% over the past year. In contrast, the ASX 200 is up less than 10%.
The post Ringing the changes: Telstra share price jumps amid latest restructuring news appeared first on The Motley Fool Australia.
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Motley Fool contributor Brendon Lau owns Telstra Corporation Limited. 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 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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