robust uptrend now, page-3

Medium-term aspirations provide for FY22 and FY23 underlying EBITDA
CAGR of 9% p.a. (MRE prior: 6.5%)
***the grow rates would be better than MB estimates for the next 2 years
MB rated it as Outperform with TP=$4.00

• Reaching a turning point. The medium-term aspirations are underpinned by
Telstra’s view for: i) ARPU growth in Mobiles; ii) stabilisation of fixed ARPUs
coupled with retail NBN margins to reach mid-teens by FY23; and iii) better
cost-out than expected (group underlying fixed cost-out of $2.7bn by FY22 vs
$2.5bn prior). ARPU growth is a key driver with TLS expecting ARPU growth
sequentially and vs the pcp given the full period benefit of pricing changes in
FY20 and an expect mix shift into higher-value plans (>$65).
• Cash flow and dividends. TLS upgraded its FY21 FCF guidance by $400m,
or 15% at the midpoint. This represents a working capital benefit from fewer
handset sales and broader creditor/receivables management. While the group
declared an 8.0cps 1H21 DPS (87% payout vs EPS), we note it only
represents 60% of FCF. We continue to forecast a 16.0cps DPS for FY21 to
FY23.