Business Summary Telstra Corporation Limited (TLS) is a provider of telecommunications and information products and services through its Australian and offshore operations. TLS has a range of businesses namely fixed broadband, mobile, data and IP, network application & services (NAS), digital media and international. Telstra Retail: This segment is a provider of telecommunication products, services and solutions across mobiles, fixed and mobile broadband, telephony and Pay TV/IPTV and digital content to consumer and business customers in Australia. It is involved in the operation of inbound and outbound call centres, Telstra shops (owned and licensed) and the Telstra dealership network. Global Enterprise and Services: This segment operates sales and contract management for business and government customers in Australia and globally. It operates management of Telstra's networks outside Australia, product management for advanced technology solutions and services, including Data and Internet, protocol (IP) networks and Network Applications and Services (NAS) products. Telstra Operations: This division is involved in overall planning, design, engineering and architecture and construction of Telstra networks, technology and information technology solution; service delivery centre. It is a provider of certain network services to nbn co under the revised NBN Definitive Agreements and commercial contracts and a provider of various telecommunication services to meet Telstra Universal Service Obligation Performance Agreement (TUSOPA). Telstra Wholesale: This segment is a provider of a range of telecommunication products and services delivered over Telstra networks and associated support systems to other carriers, carriage service providers and internet service providers and a provider of certain network assets and services to nbn co under the revised NBN Definitive Agreements. Acquisition: On 2 June 2017, TLS acquired 100% shareholding in Company 85 Limited and its wholly owned subsidiary DVS Channel Services Limited. On 30 June 2017, TLS acquired the Hosted Collaboration Solutions business assets from Inabox Group Limited. Latest Research Two more years of earnings declines to come Cost savings still insufficient to offset revenue decline — Earnings should continue to decline through to FY21e as the full impact of the NBN comes through and mobile rebases to remove remaining out-of-bundle charges. The T22 productivity gains will likely only partly offset this through FY20/21, although we do see scope for growth from FY22 onwards. We have upgraded FY19-21e Core EBITDA by 3-7% (higher fixed line margins) with D&A also cut as TLS reassess asset lives. This leads to large upgrades for core EPS (26-56%) with reported EPS (including NBN one-offs) up 9-19%. This should allow TLS to pay a 14c div in FY20, although we still see 12cps as a sustainable level. We have raised our TP by 8% to $2.70/share. For more information see research 18 Feb 2019. GICS - Telco Services Telstra Corporation Limited ASX Code: TLS Price: $3.22 12 Mth Target Price: $2.70 Rating: Sell Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is general investment advice only and does not constitute advice to any person. Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended. Snapshot Date Market Cap. Shares on issue 12 Month High 12 Month Low 10 March 2019 $38,296m 11,893.3m $3.48 $2.60 Rating Rating 12 Mth Target Price Capital Gain Gross Yield Implied Total Return Sell $2.70 -15.1% 6.3% -8.8% Investment Fundamentals FYE 30 Jun 2018A 2019F 2020F 2021F Profit $m 2,532.0 1,683.0 965.0 1,432.0 Profit (norm)* $m 2,532.0 1,683.0 965.0 1,432.0 EPS* ¢ 21.0 14.0 8.0 12.0 EPS Growth % -25.0 -33.3 -42.9 50.0 P/E* x 15.1 22.7 39.8 26.5 P/E Relative % 0.0 0.0 0.0 0.0 DPS ¢ 22.0 16.0 14.0 12.0 Yield % 6.9 5.0 4.4 3.8 Franking % 100.0 100.0 100.0 100.0 * Adjusted for goodwill and unusual items Source: Based on Citi estimates Share Price Chart Total Return on $10,000 Investment