Australia’s largest telecommunications company announced it is selling one of its data centres.
The Clayton sale will generate $416.7 million for Telstra Corporation Ltd [ASX:TLS].
The TLS share price is trading at $3.44 at the time of writing, down 1.29%, the funds from the sale could come at a much-needed time.
What’s happening at Telstra?
Going back as far as early 2019, Telstra announced significant trim to its workforce, in the region of 6,000–9,500 as part of their T22 strategy.
The restructuring of staff was coupled with $500 million in write-offs for junked legacy systems and related hardware that have been replaced by more modern technology.
Telstra had hoped these reductions would be completed by end of FY19.
The pandemic threw a spanner in the works.
In March 2020 — when COVID-19 really started to flare up — Telstra announced a halt to any further job reductions for six months.
With many people being forced to work from home, Telstra needed all hands on deck to help manage the influx of people using home services.
As COVID-19 rages on, Telstra kept working on their T22 strategy, and the sale of their data centre is one part of that.
The sale includes a triple-net lease-back arrangement, which means Telstra will retain ownership of all IT and telecommunications equipment, as well as ongoing operations and responsibility for building upgrades and repairs, future capex requirements, and security.
The company said the sale will have no impact for Telstra customers.
The lease is for an initial period of 30 years with two 10-year options for Telstra to extend the lease.
‘As part of T22, we have an ambition to monetise up to $2 billion worth of assets to strengthen our balance sheet. This deal means we have now reached over $1.5 billion,’ said Telstra CEO, Andrew Penn.
Where to from here for Telstra?
In my view Telstra is in between a rock and a hard place right now. On one hand, they have their T22 plan for downsizing. But on the other, the COVID-19 pandemic and supporting the nation as our biggest telecommunications company.
It’s a balancing act. And it could explain the sideways action for the TLS share price:
On the charts, the TLS share price moved sideways for the last couple of weeks.
Hovering around $3.42, if is it able to build some momentum to the upside, the level of $3.71 may provide future resistance.
Should the price turn and tumble down, then the levels of $3.11 and $2.87 may become the new focus.
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