Telstra Group (ASX TLS) – Reliable Dividends Backed by Infrastructure Dominance
Telstra remains Australia’s dominant telecommunications provider, and we think the stock offers one of the most dependable income streams on the ASX. At A$4.93, we see 6.5% upside to our A$5.25 price target, underpinned by continued mobile services revenue growth, disciplined cost execution, a growing dividend and an active A$750m buyback program. The recent launch of cheaper internet-only NBN plans should stem subscriber losses in fixed broadband without materially denting group earnings, given that the fixed consumer segment represents only around 4% of group EBITDA. For income-focused investors, a 4%+ fully franked yield backed by infrastructure-quality earnings is a compelling proposition.
Research published 18 November 2025. Price target and upside based on prices at time of publication.
About Telstra Group
Telstra Group Limited (ASX: TLS) is Australia’s largest telecommunications company, headquartered in Melbourne with a market capitalisation of approximately A$57 billion and an enterprise value of A$74 billion. The group operates across five key segments. The Mobile division is the earnings engine, serving more than 22 million services nationally. Fixed broadband delivers consumer and small business internet through the NBN and Telstra’s own network. Enterprise Solutions provides managed connectivity, cloud and security services to corporate and government customers. InfraCo owns and manages the passive fixed-line infrastructure including fibre, ducts and data centres. Amplitel, the separately listed towers business, houses the mobile tower portfolio and generates stable, long-duration lease income. Together, these divisions give Telstra unmatched scale and infrastructure reach across Australian telecommunications.
Why We Like TLS at Current Levels
The investment case for Telstra is straightforward. This is the closest thing the ASX has to a telecommunications utility, and the dividend profile reflects that. At A$4.93, the stock offers a prospective yield of 4.1% in FY26 growing to 4.5% in FY28, fully franked, with a clear upward trajectory supported by rising earnings and an ongoing buyback. We retain a Buy rating with a 12-month price target of A$5.25, representing 6.5% upside from current levels.
Our price target is derived from a 50/50 blend of net asset value and EV/EBITDA approaches, applying a target EV/EBITDA multiple of 6x. That multiple is appropriate for a business of Telstra’s scale and infrastructure characteristics, and reflects the stability and predictability of its earnings base. The mobile division continues to deliver strong revenue growth, cost targets are being met or exceeded, and the dividend has been growing consistently. These are the ingredients of a reliable compounder for income portfolios.
Cheaper NBN Plans Address a Known Pressure Point
Telstra recently introduced a new range of internet-only NBN plans priced between A$85 and A$129 per month, covering speeds from NBN 25 to NBN 1000 Mbps. These plans represent a 9 to 13% discount to the existing bundled plans, with the key difference being the removal of the high-quality modem that Telstra has traditionally included. Stripping out the modem removes a significant pain point for customers doing price comparisons across providers, and positions the new plans competitively against challenger brands and industry pricing benchmarks.
This move was not a surprise. Management had consistently signalled that it would need to respond to ongoing NBN subscriber declines, and the pricing structure looks carefully designed to balance customer acquisition against margin preservation. We expect the new plans to deliver a significant improvement in NBN subscriber trends, but there will be some margin headwind from existing subscribers spinning down to the cheaper internet-only tier. On balance, we think that trade-off is the right one. Losing subscribers entirely is worse than retaining them at a lower price point, and the competitive positioning should slow the erosion that has been weighing on fixed broadband numbers.
Fixed Broadband in Context
It is important to keep the fixed consumer and small business segment in perspective. Fixed C&SB represents roughly 4% of group EBITDA, and it is growing at only 2.7% into FY26 compared to total group EBITDA growth of 3.9%. This is not the division that drives the investment case. It is a segment that needs to be managed well to avoid becoming a drag, and the cheaper NBN plans are a sensible step toward stabilising it.
The broader fixed-line story is more nuanced than subscriber numbers alone. Telstra has several levers working in its favour to offset the declining subscriber base in NBN:
- Cost optimisation across the fixed network continues to deliver savings that support margins even as subscribers churn
- Fixed wireless penetration is growing as an alternative delivery mechanism, particularly in regional areas where NBN economics are less favourable
- ARPU growth from customers upgrading to higher speed tiers partially offsets the impact of lost subscribers
- The internet-only plans should slow the rate of subscriber loss while maintaining positive unit economics on each connection
The net effect is a segment that is stable rather than exciting, which is exactly what Telstra needs it to be while mobile and infrastructure do the heavy lifting on group earnings growth.
Mobile Services Revenue Remains the Growth Engine
The real driver of the Telstra earnings trajectory is mobile. The company continues to deliver strong mobile services revenue growth, supported by a premium brand position, network quality advantages and a rational competitive environment. Telstra holds the largest share of the Australian mobile market and has been able to grow ARPU through a combination of price increases, plan mix shifts toward higher-value postpaid and 5G plans, and a growing base of connected devices.
This is the part of the business that institutional research consistently points to as the foundation for a Buy rating. One major investment bank notes that continued mobile services revenue growth, combined with strong cost execution, a growing dividend and continued buybacks, supports the case for owning Telstra at current levels. We agree with that assessment. Mobile is a high-margin, recurring-revenue business that generates substantial free cash flow, and Telstra’s scale advantages in network coverage and capacity are difficult for Optus and TPG to replicate.
Cost Execution and Earnings Outlook
Telstra’s T25 cost reduction program has been a genuine success story, delivering savings across the business that have flowed through to EBITDA expansion. The financial trajectory over the forecast period shows steady, if unspectacular, improvement across all key metrics:
- Revenue is expected to be broadly stable at A$23.6 billion in FY26 before growing modestly to A$24.1 billion in FY28
- EBITDA improves from A$8,638 million in FY25 to A$8,966 million in FY26 and A$9,579 million in FY28, a three-year CAGR of roughly 3.5%
- EPS grows from A$0.20 in FY25 to A$0.23 in FY28
- Dividend yields build from 4.6% in FY25 to an expected 4.5% in FY28, with the FY26 dip to 4.1% reflecting the share price at time of publication rather than any reduction in the dividend
- The PE multiple ranges from 21.5x to 24.7x across the forecast period, consistent with a utility-grade telecoms business delivering stable earnings growth
- Net debt to EBITDA sits at a comfortable 1.6x, providing ample capacity for ongoing capital returns
These are not growth stock numbers. They are infrastructure-grade earnings growing at a steady pace, and that is precisely the point for income investors. Telstra is not trying to be a high-growth technology business. It is running a disciplined playbook of cost reduction, mobile revenue growth and capital returns that delivers a reliable and growing income stream for shareholders.
Dividend and Capital Returns
For investors focused on income, Telstra’s capital return framework is one of the most attractive on the ASX. The fully franked dividend yield sits above 4% across the forecast period, supported by strong free cash flow generation and a balance sheet that is conservatively geared at 1.6x net debt to EBITDA. The A$750 million buyback program provides additional capital returns above the dividend and helps support EPS growth by reducing the share count over time.
The growing dividend trajectory is important. This is not a company paying out more than it earns or stretching the balance sheet to maintain a yield. Telstra’s dividends are comfortably covered by free cash flow, and the payout ratio leaves room for continued increases as EBITDA grows through the forecast period. The infrastructure-backed nature of the earnings base, spanning mobile towers through Amplitel, passive fixed-line assets through InfraCo and long-term enterprise contracts, provides the kind of stability and predictability that income-focused portfolios require.
CROCI, a measure of cash returns on capital invested, improves from 8.3% in FY25 to 8.8% in FY26 and 9.1% in FY27. That upward trajectory indicates the business is becoming more efficient at generating cash returns on its substantial asset base, which in turn supports the sustainability of the dividend and buyback program over the medium term.
Competitive Implications for the Broadband Market
Telstra’s move on NBN pricing has implications beyond its own subscriber numbers. The cheaper internet-only plans put pressure on challenger broadband providers that have been competing primarily on price. This is consistent with a more cautious industry view on companies like Aussie Broadband and Superloop, where the competitive dynamics have just become less favourable. When the market leader moves to close the price gap, the value proposition of cheaper alternatives narrows, and customer acquisition costs for smaller players tend to rise.
For Telstra, this is a defensive move executed from a position of strength. The company can afford to sacrifice some margin on NBN because the fixed broadband segment is a small part of the overall earnings base. Smaller, pure-play broadband competitors do not have that luxury. The asymmetry of the competitive impact favours Telstra, and we think this is an underappreciated aspect of the announcement.
Key Risks
The primary downside risks to our view centre on competitive intensity across both mobile and fixed markets. A more aggressive pricing stance from Optus or TPG in mobile could compress the ARPU growth that underpins Telstra’s earnings trajectory. In fixed broadband, further NBN subscriber losses beyond what the new plans can recover would weigh on segment earnings, though the group-level impact would remain modest given the 4% EBITDA contribution.
Regulatory risk is a persistent consideration for a business of Telstra’s scale. Changes to NBN pricing structures, mobile access regulations or spectrum allocation rules could all impact the earnings outlook. Cost execution risk is also worth monitoring. The T25 program has delivered well, but maintaining cost discipline as inflation pressures build across labour and network maintenance is an ongoing challenge.
Finally, delays to infrastructure monetisation, including the potential for further value realisation from InfraCo and Amplitel, could limit upside to our valuation. These assets represent significant embedded value, but the timing and mechanism of any further separation or sale remains uncertain.
Our View
Telstra is a core holding for income-focused portfolios on the ASX. The combination of a 4%+ fully franked yield, a growing dividend, an active buyback program and infrastructure-backed earnings stability is difficult to replicate elsewhere in the Australian telecommunications sector. The recent NBN pricing action demonstrates that management is willing to make pragmatic competitive moves to protect market share without jeopardising the group earnings trajectory. Mobile services revenue growth continues to drive EBITDA expansion, cost execution remains strong, and the balance sheet provides comfortable capacity for continued capital returns. At A$4.93 with a credible path to A$5.25 over 12 months, we think Telstra offers a solid entry point for investors seeking reliable, growing income backed by Australia’s most extensive telecommunications infrastructure.
If you would like to discuss Telstra or how it might fit within your portfolio, request a callback or call us on 1300 889 603.
