Where to now for long term investors of Telstra, page-12749

TelstraMobile underpins guidance upgrade, but FCFmattersKey Points• FY25 EBITDA guidance refined at the lower end to $8.5-8.7bnrepresenting +0.6% at the mid-point due to mobile and EBA outcome.
• We estimate FY25 FCF to equity holders of 19.9cps - underpinning anincrease in the dividend to 19.0cps (9.5cps per half) or +6% YoY.• Previously announced price increases to benefit CF/EPS/DPS growthinto FY25. Mobile markets to drive DPS in FY26+. Retain Outperform.
• Everyone has a definition for FCF. Telstra changed its definition ofFCF to exclude strategic investments (intercity fibre and Viasat build).These were previously funded out of excess FCF. Given the pace hasaccelerated into FY26 ($500m spend expected), this suggests theexpenditure will be partly debt funded into FY25.
• Dividend still increasing...balance sheet sound. Our view for thedividend to increase in 1H25 to 9.5cps or 19.0cps for the full yearremains unchanged.
Our estimate of FCF to equity holders (after interestand before strategic investment) is 19.9cps - implying a 95% payout ratio.This includes a $300m restructuring cash payment in 1H25; and ~$340mof working capital headwinds.
Telstra's gearing is currently at 1.9x and weestimate it remains at this level even with an increased dividend (EBITDAhigher and strategic investment is partly funded by OCFs).
• Enterprise in mobile under pressure too. One of the key takeawaysfrom this result was competitive pressure in the NAS business appearsto be flowing through to enterprise mobile as well. This was reflected inpostpaid ARPU being down HoH - in addition to soft subscriber growth inthe period.

EPS: FY25/26/27e +5%/+3%/+3% reflecting lower D&A. There is minimalchange to our EBITDA or FCF assumptions; and subsequently our dividendforecasts as a result.Price Target: Unchanged at $4.30 (refer cash flow comments above).Catalysts: Price increases from competitors; AGM; Investor Day; 1H25resultInvestment Thesis and RecommendationPreviously announced price increase to benefit CF/EPS/DPS growth intoFY25.
Mobile markets to drive DPS in FY26+. Outperform retained.