Will Subsea Cables Save The Telstra (ASX:TLS) Share Price?

Telstra is Australia’s largest and oldest telecommunications business, … the Australian Government sold Telstra to Australian investors via the ASX.

Could subsea cables save the Telstra Corporation Ltd (ASX: TLS) share price?

Telstra is Australia’s largest and oldest telecommunications business, having built the first telegraph line in 1854. Today, it provides more than 17 million retail mobile services, nearly 5 million retail fixed voice services (e.g. home phones) and 3.6 million broadband services.

It also has operations stretching across eHealth, network applications and subsea cabling. Starting in 1997 (until 2006), the Australian Government sold Telstra to Australian investors via the ASX. The second batch of Government share sales, called “T2”, was conducted in 1999 at $7.40 per share.

Telstra’s subsea cables

Telstra is committing to a major upgrade of its submarine cable network according to the Australian Financial Review.

Australia’s largest telecommunications business has cables that run from Australia to many countries in the Asia Pacific region including to the United States of America.

Telstra will use US business Infinera to upgrade its huge network of submarine cables, which should increase the capacity of the cables by 160% whilst lowering the power usage.

These cables are important for the high volume of data from services like Netflix and Youtube. Around 40% of all Asian data traffic may be transmitted on Telstra’s cables, which is valuable.

It’s good to see that Telstra is continuing to develop its ‘InfraCo’ infrastructure business. Telstra doesn’t have to rely on just job cuts to send its profit higher. Initiatives such as huge data packs and soon-to-be-released 5G phones could boost profit over the next few years.

However in the meantime, the NBN is still causing damage to Telstra’s profit margins so it’s not all good news. Competition from peers like TPG Telecom Ltd (ASX: TPM) and Amaysim Australia Ltd (ASX: AYS) is really heating up.

Is the Telstra share price a buy today?

Some value investors believe that Telstra now represents good value, even if its earnings take a hit in FY19. Some analyst estimates put Telstra’s earnings dropping by at least 25% in FY19, so it could be valued at around 13 times FY19’s earnings.

There some compelling reasons to buy Telstra, such as 5G, automated cars and the Internet of Things. However, until we find out what the pricing structure of those services is I can’t see sustainable growth of Telstra’s bottom line. There may be more reliable ASX shares out there for your portfolio such as the ones mentioned in the free report below.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

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Telstra Deploys Major Upgrade to Network Services in Asia Pacific

Telstra and Infinera (NASDAQ:INFN) on Sunday unveiled a major upgrade to Telstra’s network services in Asia Pacific for a significant increase in fibre …

As part of an ongoing partnership, Infinera’s fourth-generation ICE4 optical engine is being rolled out across Telstra’s Asia Pacific subsea infrastructure, increasing the capacity, agility and reliability of Telstra’s network.

The ICE4 subsea solution allows Telstra to rapidly activate new capacity for customers, delivering multi-terabit capacity with low power consumption and high reliability.

ICE4 increases Telstra’s fibre capacity by 160 per cent and port density by 140 per cent, while also decreasing power consumption, allowing Telstra to continually improve network services for customers.

Telstra is one of the largest providers of 100 Gigabit per second (Gb/s) network services globally and the ICE4 technology positions the company to support customers’ future connectivity demands, activating capacity per wavelength of up to 200 Gb/s.

Telstra’s Network Planning Principal, Andy Lumsden, said that Telstra was committed to continually developing its network to support the increasing demand for data right across the Asia Pacific region.

“Our commitment to our Asia Pacific customers means we are always adapting and creating capacity where it is needed. This means we are continually working to deploy new technologies that enhance our existing network and complement our latest capacity investments,” Mr Lumsden said.

“With Infinera’s ICE4 optical engine, we are deploying the latest technology across our network. We can now provision new services faster than ever before, which is critical in a region when capacity demand on our international networks has almost doubled over the past two years.”

Telstra has the largest subsea cable network in the Asia Pacific, reaching more than 400,000km and enough to circle the world almost 10 times.

Infinera’s Vice President of Sales, Andrew Bond-Webster, said early testing on the rollout had delivered strong results.

“ICE4, our latest optical engine, enables Telstra to deliver multi-terabit capacity cost effectively with low power consumption and with the reliability required for subsea networks to perform,” Mr Bond-Webster said.

“We have partnered with Telstra for a decade, and work collaboratively to co-create solutions that respond rapidly to changing data consumption and the growth of bandwidth-heavy applications.”

Telstra’s ICE4 network upgrade will be completed in the coming months.

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Telstra remains Australia’s most valuable brand, while Qantas is the strongest

Telstra has held onto the crown of Australia’s most valuable brand for the fourth year running, while Qantas has surged to become the country’s …

“We’ve really started to put forward the improvements we’ve made in the customer experience, the removal of the data overages, the ability for customers to add on services easily,” Mr Nicholas said.

Telstra is in the middle of its massive Telstra2022 transformation project. Customer experience is a key area the telco is revamping with greater digitisation and automation.

In terms of brand marketing, Mr Nicholas said the telco continued to use a broad mix of channels.

Banks under fire

Last year’s No.2 and No.3 most valuable brands – Commonwealth Bank of Australia and ANZ – slipped off the back of renewed negativity towards the finance sector thanks to the banking royal commission, recording brand values in 2019 of $10.6 billion and $9.1 billion respectively.

Jumping up ahead of the two big banks were supermarket giants Woolworths, coming in second with a brand valuation of $11.2 billion, and Coles, at third with a brand valuation of $11 billion.

“There is a view banks were profiteering, there previously has been other negative publicity. Some of that consumer reaction has been ‘not surprised’. This decline in brand strengths is a very significant [part] of how they might lead to a decline in brand revenues,” Mr Crowe said.

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“As much as there has been downward pressure on the banks, the retailers have performed strongly. What you’ve seen is strong customer metrics and very positive brand investment, both scoring well in promotions.

“If current growth trends were to continue, Woolworths will again challenge Telstra for the most valuable Australian brand in coming years.”

National Australia Bank managed to hold onto sixth ranking, with its brand value actually increasing to $8.6 billion, while Westpac slipped to eighth, from seventh last year, to a brand valuation of $7.3 billion.

BHP took out seventh spot with a brand value of $8.3 billion, while Optus came in at $5.3 billion and Rio Tinto at $4.7 billion.

Qantas takes off

Meanwhile in brand strength, Qantas surged into No.1 position, taking the title from Commonwealth Bank, which fell to seventh. Brand strength is based on marketing investment, familiarity, loyalty, staff satisfaction and corporate reputation.

“Qantas’ brand performance is quite exceptional given that enterprise value has decreased by 8 per cent,” Mr Crowe said. “This result highlights the importance of the iconic brand to the company as it deals with increasing competition on its domestic and international routes.”

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Qantas’ brand strength surged in 2019.Peter Braig

“Brands in the airline sector have been to the fore in Australian aviation with both Jetstar [owned by Qantas] and Virgin Australia also recording strong increases in value.”

Mr Crowe said Qantas had benefited from the rebranding it did in 2016 and significant marketing investment.

“We’ve spent almost 100 years building our brand but a large part of that is making sure you deliver every day for customers,” Qantas chief customer officer Vanessa Hudson said.

“The expectation of a brand has to meet the reality and we invest a lot in making sure we improve on both.”

Virgin Australia came in as the third-strongest Australian brand, behind Harvey Norman at No.2.

Optus at fourth pipped rival Telstra at fifth in terms of brand strength, while Westfield jumped from outside the top 10 to sixth.

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Telstra upgrades APAC network services with Infinera’s Infinite Capacity Engine 4

Australian operator Telstra and Infinera have launched a boost to Telstra’s network services for customers in Asia Pacific, with an increase in fibre …
Australian operator Telstra and Infinera have launched a boost to Telstra’s network services for customers in Asia Pacific, with an increase in fibre capacity to Telstra’s subsea infrastructure using Infinera’s Infinite Capacity Engine 4 (ICE4). Infinera’s fourth-generation ICE4 optical engine is being rolled out across Telstra’s Asia Pacific subsea infrastructure.

The ICE4 subsea service is expected to enable Telstra to activate new capacity for customers, delivering multi-terabit capacity. ICE4 increases Telstra’s fibre capacity by 160 percent and port density by 140 percent, while also decreasing power consumption, Infinera said. Telstra’s ICE4 network upgrade will be completed in the coming months.

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Telstra sends strong signal with submarine cable upgrade

Telstra has made one of the strongest statements since it launched its T22 strategy that it has not turned its back on fixed line infrastructure by …

High quality subsea cables are essential because they link Australia to the rest of the world and carry, among other things, the increasingly high volume of data necessary to stream Netflix and other video services.

The move comes seven months after Telstra announced it was separating its fixed-line infrastructure into a subsidiary, InfraCo, which includes the company’s submarine network.

That decision raised concerns Telstra was turning its back on fixed line infrastructure to focus on retail and mobile infrastructure, a response to the National Broadband Network roll-out.

It also raised the possibility that Telstra would cut InfraCo loose entirely, setting it up as an independent business in preparation to purchase or merge with a privatised NBN – something Telstra chief executive Andy Penn has said is under consideration.

Fibre optic cables, of the sort used by the NBN, use pulses of light to transfer data. It’s a much more efficient medium than either copper wire or radiowaves.Glenn Hunt

But Mark Gregory, associate professor of network engineering at RMIT, said the upgrade showed Telstra was being positive about its fixed-line infrastructure rather than neglecting it.

“People were concerned that when they moved the assets into InfraCo they might stop spending and focus on mobile and retail. But what this says is they are investing in InfraCo, so this is really quite a big announcement.

“It puts concerns about Telstra’s direction to rest. They could have just separated it out, and at some point they might just roll it into the NBN. What they’re demonstrating is InfraCo is still a key part of Telstra’s business strategy and they’re making major investments in infrastructure.”

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Telstra’s subsea cables run for 400,000 kilometres – equivalent to 10 times around the world – which the company claims makes it the largest network of subsea cables in the Asia Pacific region.

Telstra executive Michael Ebeid says the company’s extensive subsea network sets it up well to ramp up its overseas business.James Brickwood

Telstra’s network planning principal, Andy Lumsden, said Infinera’s technology, called Infinite Capacity Engine 4 (ICE4), would increase capacity per wavelength to up to 200 gigabits per second.

“With Infinera’s ICE4 optical engine, we are deploying the latest technology across our network. We can now provision new services faster than ever before, which is critical in a region when capacity demand on our international networks has almost doubled over the past two years,” Mr Lumsden said.

In a recent interview with The Australian Financial Review, Telstra’s head of enterprise Michael Ebeid said the company’s large subsea network would allow the company to expand its international business.

“One of Telstra’s well-kept secrets, which I don’t think we talk about enough, is Telstra owns and operates the biggest subsea cable network across Asia Pacific. When you think about all the countries in Asia, Telstra is carrying right now around 40 per cent of the traffic of all of Asia on Telstra networks and cables. A lot of people don’t realise that,” he said.

Alongside Telstra, companies including Singtel, Vocus, TPG, Verizon, AT&T, Spark New Zealand, and even Google own intercontinental subsea cables linking Australia to the rest of the world.

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