AFR 11.10.22 saidJPMorgan reckons selling a 49 per cent stake in...

AFR 11.10.22 said

JPMorgan reckons selling a 49 per cent stake in InfraCo could reap $12 billion to $17 billion in post-tax cash proceeds for Telstra, which could be used to repay debt and for capital returns.

If Telstra wanted to keep net debt in the middle of its 1.5 to 2-times EBITDA target, JPMorgan said it may need to set aside only $1.75 billion to repay debt.

“Therefore, under the different valuation scenarios we estimate A$10.5-$15.5 billion could be returned to shareholders,” the analysts told clients on Tuesday morning.

JPMorgan’s tipping buybacks as the most likely way to return the capital, which would increase dividends on remaining shares.

The analysts said Telstra’s dividends could increase 9 per cent to 24 per cent if the company used proceeds to buy back shares, depending on the InfraCo sale price. [JPMorgan ran the numbers using a 20 to 30-times EBITDA range and dividend per share forecasts for FY24]...

“A monetization of the infrastructure assets could be one of the most significant events for Telstra since the creation of the NBN Co,” JPMorgan said.

“The long-term contracts, predictable cashflows and growth projects liken the InfraCo assets to recent passive telecommunication assets transactions which achieved HIGH MULTIPLES (my emphases).

“We estimate a sale this fiscal year followed by a share buyback would see significant ongoing dividend accretion for shareholders.”

Telstra InfraCo would own and operate Telstra’s passive network assets including data centres, exchanges, fibre network, physical mobile tower assets owned or operated by the Amplitel business, ducts and pipes".

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