Telstra, a crowd favourite with SMSF investors, this week announced it was slashing 8000 jobs. Cost-cutting in public companies can be positive for share prices, but in this case, a forecast of lower profits in the Telco’s disclosures saw values take a hit.
Given that Telstra investors predominantly invest for the dividend, the news of lower profits and possibly lower dividends was the last straw for many jaded investors, said Verante Financial Planning director Liam Shorte.
“However, this move to simplify the business and prepare it for the new market conditions of NBN and 5G Mobile is what analysts had been asking of the company in order for it to compete long term,” he explained.
“So the drop this week in Telstra’s share price is the bad short term news and what we need to understand now is whether the strategy will work in increasing their competitive position against the other players in the market in the medium to long term.”
Mr Shorte said he is hoping for a turnaround in the business, especially as it’s the only option for service in non-metropolitan areas.
“I believe a leaner, meaner Telstra could be a winner but I think many retiree investors will not be prepared to wait for the outcome so now Telstra may become a long-term play for those in accumulation,” he cautioned.
Telstra and the banks are in doom loops, far more regulatory head winds, they have been gouging customers over for a long time, pricing pressures everywhere and hard to see them as viable investments. Advisers will keep spruiking them as they are safe and pay a dividend but we could be in for a new normal where by what we traditionally believed to the case is no longer so.