Telstra's equity has remained relatively constant at around...

Telstra's equity has remained relatively constant at around $15b.

From 2016 to 2019 Telstra maintained a profit of around $3.5b -$4b. Or a return on its equity of around 23%- 26%. This enabled the market to "price" that equity at around $40- $50b in market capitalization. It also created the perception that Telstra can be a consistent dividend player with dividend levels supported by that profit.

In 2020 that profit dropped to just $1.8b as the build out of the NBN nears completion and its effect on Telstra's profitability starts to get really impacted. Instead of Telstra retaining those one-off NBN payments, Telstra distributed them out as special dividends. The problem now is that those one off payments are going to cease, and the money is out the door already. Those 'special dividend' sugar hits are going to cease.

All that remains going forward will be the dividends that will have to be financed from normal operations.

But here we get to the really damaging part:

Remember those $3.5b-$4b historical profits, well not just did they shrink to just $1.8b in 2020, 2021 and 2022 profits are projected to shrink further to a billion or so. Best case scenario is that if everything goes to plan, those profits might be able to recover to back to that $1.8b somewhere around 2023 or 2024.

Now does one honestly think the market is going to price that $15b in equity anywhere near its 2016-2019 prices when its 'best case scenario' is for that historical $3.5b profit to 'recover' to $1.8b in a few years time?????

I believe the market once it fully factors this in will price that equity off the new base of $1.8b.
At $3.5b-$4b the market priced that equity around 2.5 times.
At $1.8b the market will price that equity at around 1.3 times.

If this becomes the case 1.3 x $15b = $20b

Current market cap of telstra is $35b.

Hence there is still a very big risk that the share price will continue to drop until telstras market cap drops from $35b to $20b.