Is Telstra (ASX:TLS) stock price finally a buy?

The Telstra Company Ltd. (ASX:TLS) The stock price has been suffering since February 2015. It’s down more than 40% since then. But is it a buy now?

Australia’s largest telecommunications company has a large mobile customer base, a good market share of home broadband customers and a number of other divisions that add value to the business.

Why Telstra’s share price could be a buy

Over the past few years, Telstra’s share price and earnings have suffered from the transition to NBN.

In the past, Telstra owned most of the underground cables in Australia. It would earn high margins on Telstra’s broadband customers and still earn money on other customers for different providers using the network if they also used those cables. Telstra lost this strong market position when it sold its cables to NBN.

But the transition to NBN is over. This means that Telstra’s profits are no longer shrinking, which is positive.

On top of that, Telstra has been working hard to reduce costs within its business with its T22 strategy and now the recently announced T25 strategy.

Although a smaller company than it used to be, Telstra can start from here. 5G allows the company to invest and get ahead of its competitors. It is so far ahead in the regional areas that TPG Telecom SA (ASX: TPG) (which includes Vodafone Australia) has signed a deal with Telstra so its customers can access the regional network, so Telstra wins either way.

Telstra recently acquired Digicel Pacific, giving it exposure to a number of Pacific island countries where it is now a leader, and giving it revenue diversification. The telecommunications company is also building Telstra Health, which taps into the strong tailwind of aging demographics and the growing technological nature of the healthcare world.

For me, one of the most interesting aspects of the Telstra share price is that inflation can now be a boost. Telstra said it would raise prices for customers based on CPI inflation. Industry competition on price may not have allowed this to happen in previous years, but now Telstra’s revenue can get a free kick if it continues to raise prices at the rate of inflation.

Finally, the FY22 result came with a surprise – dividend growth. If this means Telstra will continue to steadily increase its dividend, then that’s very good news for income-oriented investors.

Final Thoughts

I think Telstra’s share price and earnings look to a positive future, especially with its market position with 5G. Telstra’s potential to offer 5G-powered home broadband (and phase out NBN) holds promise for its future “fixed” business margins. Telstra expects profit growth over the next few years.

While I certainly wouldn’t place Telstra at the top of my wish list, for investors considering ASX stock, I think things are looking very promising now.