Telstra (TLS.ASX) is coming under scrutiny, as investors assess the threat of satellite-delivered communications alternatives. The catalyst is the initial public offer of Space Exploration Technologies, or SpaceX, whose “mission is to build the systems and technologies necessary to make life multiplanetary.”

Why it matters: Back on planet earth, SpaceX’s Starlink is expanding global access to satellite internet and deploying satellite-to-mobile capabilities. As the key cash engine (USD 7.2 billion EBITDA versus SpaceX’s total of USD 6.6 billion in 2025), Starlink’s plans have implications for incumbent telcos.

  • However, the impact is unlikely to be material for the foreseeable future. Data volume constraints over available spectrum on earth and inferior signal latency limit how much Starlink can penetrate densely populated areas dominated by incumbent fiber and terrestrial mobile operators.
  • Starlink also faces challenges accessing finite and highly regulated radio spectrum. As such, Starlink’s growth aspirations most likely rest on providing communications access to one-fifth of the global population in less-dense areas and striking partnerships with incumbent telcos to do so.

The bottom line: Given our unperturbed view of the satellite threat, we retain our $5.40 fair value estimate on narrow-moat Telstra. The investment case of resilient earnings, dependable dividends, and growing ROIC is intact, underpinned by a rational industry backdrop.

  • Such is the rational landscape, and, in improving industry returns, the regulator recently pegged the renewal cost for the industry at $7.3 billion for its spectrum licenses expiring between 2028 and 2032. Why? Because it thinks the telcos can afford it, much to their chagrin.
  • It was this regulatory decision on May 20, 2026, that precipitated the recent negative sentiment for Telstra, with its shares now trading at a 5% discount to our intrinsic assessment, from a 3% premium prior to the spectrum renewal pricing decision.

Assessing Satellite Threat to Telstra

Telstra’s performance during and since the depths of covid-19 shows the resilience of its earnings and the strength of its balance sheet. The $2.7 billion cost-out program under T22 was delivered, and an additional $428 million of costs was eliminated under the T25 plan.

In May 2025, Telstra unveiled a new five-year strategic plan. It is targeting mid-single-digit compound annual growth in cash earnings to fiscal 2030, while aiming to generate “a sustainable and growing dividend.” Cost discipline and productivity improvements are continuing under the new strategy.

Telstra is the largest telecommunications services provider in Australia. It has dominant market share in each service category and customer segment, and enjoys cost advantages that underpin its narrow moat rating. While competition is robust, Telstra’s mobile market shares are likely to prove resilient.

Telstra’s infrastructure provides the most comprehensive coverage for fixed-line, mobile, and broadband in Australia, which drives reliable cash flow. Telstra is not the cheapest provider of telecommunications services, but it is the lowest-cost provider, resulting in EBITDA margins of over 30%.

The NBN has reshaped Telstra, and a slimmed-down operational base is now focused on mobiles and efficiency improvements. Competitive advantage in coverage and speed of the Telstra mobile network attracts customers demanding reliable mobile connectivity. The network has the capacity to handle escalating demand for data. NAS delivers value-added services on Telstra’s high-speed networks, including cloud computing, high-definition video conferencing, and managed data networks for private and public sector entities.

Offsetting its success in mobile, fixed-voice products are experiencing both structural decline and increased competition. In line with global trends, revenue from traditional voice services provided by the public switched telephone network, or copper network, is in decline. This is the reason why Telstra’s continuing commitment to cost reductions and efficiency gains is important.

Bulls Say

  • Telstra has market-leading shares across all vital telecommunications segments and is likely to maintain these positions in the future.
  • While the telecommunications space is incredibly competitive, Telstra has a significant competitive advantage via its extensive mobile and wireless networks.
  • Decommissioning of the copper network lowers capital intensiveness of the business. Telstra can redirect capital to the higher-growth mobile segment.

Bears Say

  • Regulatory risks are real. Wholesale NBN prices are high and could increase further, while government scrutiny on Telstra’s market power is ever-present, especially in regional and rural areas.
  • Competitive intensity is high, especially in mobile.

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