Telstra Shares At Decade High as Market Cap Breaks A$60 Billion

Telstra shares (ASX: TLS) have been quietly carving out gains this year, reclaiming their position as one of Australia’s 15 most valuable companies, with shares closing at their highest level since 2016 as the telecommunications giant’s multi-year turnaround gains momentum.

The Telstra share price heads into the open at A$5.55, after a 2.59% gain on Tuesday pushed the company’s market cap above A$60 billion for the first time in nearly a decade. Trading volume reached approximately 25.8 million shares, roughly 1.47 times the daily average, signalling broad participation in the move. The stock has now fully recovered from the painful downturn that followed the National Broadband Network rollout, which pressured earnings and forced dividend cuts between 2016 and 2020.

Strong Earnings Support Share Price

Behind the decade-high share price lies a fundamental transformation in Telstra’s earnings profile. The company’s most recent fiscal results delivered double-digit EBITDA growth and profit increases exceeding 30%, driven primarily by mobile ARPU gains and subscriber growth in premium segments. Management has progressively tightened guidance for underlying earnings, signalling confidence in the sustainability of current momentum.

The mobile division has emerged as Telstra’s primary earnings engine, leveraging the company’s leadership in 5G network deployment and superior coverage in regional Australia. This premium positioning has enabled Telstra to implement price increases without triggering significant customer churn, a rare achievement in the typically commoditised telecommunications sector. The company’s T22 and T25 strategic programmes, focused on cost reduction and operational simplification, have delivered tangible results that are now flowing through to the bottom line.

Infrastructure monetisation has provided an additional earnings pillar. Revenue streams from NBN-related payments, tower leasing, fibre assets, data centres, and subsea cable infrastructure are contributing stable, long-duration cash flows that appeal to infrastructure investors. This diversification has helped offset legacy fixed-line revenue declines and repositioned Telstra as something closer to an infrastructure play than a traditional telco.

Telstra’s recent capital management decisions have amplified positive sentiment. The company increased its interim dividend, reversing years of conservative payout policies, and expanded its on-market buyback programme to A$1.25 billion. These moves signal management’s view that the shares remain attractive even after the strong rally, while also demonstrating balance sheet strength following years of deleveraging.

For income-focused investors, the combination of a fully franked dividend yield in the 3-4% range plus ongoing share buybacks creates a compelling total return proposition. The buyback programme mechanically supports earnings per share growth and return on equity metrics, while reducing shares on issue at a time when management believes intrinsic value exceeds market price.

Market Structure Supports Premium Valuation

Australia’s rational three-player mobile market structure of Telstra, Optus, and TPG, has proven more disciplined than many international markets. Telstra’s scale advantages, brand strength, and network quality have created a defensive moat that justifies a valuation premium relative to global telecommunications peers. The company’s partnerships, including a collaboration with SpaceX to provide satellite backup coverage in remote areas, demonstrate its willingness to embrace new technologies while protecting its core franchise.

Markets have increasingly viewed Telstra through a defensive-growth lens rather than as a mature, low-growth utility. In an environment of macroeconomic uncertainty, the stock offers predictable cash flows, inflation-linked pricing power in mobile, and exposure to structural data demand growth from 5G, IoT, and enterprise digitalisation. This narrative shift has attracted global yield and infrastructure capital, expanding the natural buyer base for the shares.

Valuation Concerns Raise Heads

The rally has not been without sceptics. Telstra’s price-to-earnings multiple now sits in the low-30s on trailing earnings, materially above both its historical average and most incumbent telecommunications operators globally. Price-to-sales and price-to-earnings ratios are near the upper end of their 20-year ranges, suggesting the market has priced in significant optimism about future execution.

Bears argue that current earnings strength reflects cyclical tailwinds, particularly pricing power in a concentrated market rather than sustainably higher structural growth. Any disappointment in mobile ARPU trends, unexpected regulatory intervention to promote competition, or capital expenditure blowouts could trigger a sharp de-rating from current levels. The decision to expand buybacks near all-time valuation highs also carries opportunity-cost risk if future investment needs prove larger than anticipated.

Longer-term competitive threats loom on the horizon. Satellite providers including Starlink and other low-earth-orbit constellations could erode Telstra’s traditional advantage in remote and regional coverage, even as Telstra itself partners with these technologies. Regulatory shifts pushing for lower wholesale prices or more aggressive infrastructure sharing could compress margins in both fixed and mobile segments.