---
endpoint: analytics
pattern: Telecoms
status: done
latency_ms: 242197
conversation_id: 5c9b4443-f2fd-4fb0-a793-875d99628671
citations: 0
created: 2026-05-31 18:59:49Z
---

# How does Telstra’s valuation compare to peers, and what justifies its premium/discount?

# Telstra (TLS AU) — Valuation vs Peers and What Justifies the Premium/Discount

**Note on coverage**: The internal CLSA research available in this workspace covers Telstra and TPG (Australia's two largest listed telcos) as a direct pair. The single-most-relevant note is CLSA's 27-May-2025 Telstra investor-day review ("Dreamtime journey", HOLD, A$4.10 TP) [1], with the cross-read coming from CLSA's 7-May-2025 TPG note (O-PF, A$5.80 TP) [10]. References to Singtel, Vodafone, Optus and "peer benchmarks" come from inside those notes. No newer global peer-comp table (Spark NZ, BT, DT, T-Mobile, etc.) exists in the internal corpus at this scope.

---

## 1. Where Telstra Trades — Absolute Multiples (CLSA estimates, year to June)

| Metric | FY24A | FY25CL | FY26CL | FY27CL |
|---|---|---|---|---|
| EPS (A¢) | 14.0 | 19.5 | 22.3 | 23.0 |
| **PE (x)** | **33.8** | **24.4** | **21.3** | **20.6** |
| **Dividend Yield (%)** | 3.8 | 4.0 | 4.4 | 4.6 |
| ROE (%) | 10.7 | 15.3 | 17.7 | 18.2 |
| Net debt/equity (%) | 74.6 | 75.3 | 70.6 | 66.8 |

Source: CLSA financial summary table [2].

CLSA was working off a A$4.75 share price as at 27-May-2025 with a 12-month target of **A$4.10**, implying **-13.7% capital downside, +5.4% dividend yield, and -8.3% TSR** [9]. The Hold rating is grounded in valuation, not a deteriorating earnings call: FY25→FY27 EPS is forecast to compound at ~17% per year off the FY24 trough [2].

---

## 2. EV/EBITDA — Where Telstra Sits vs Its Own History

CLSA's chosen target multiple, with the historical band, is the cleanest "premium/discount" framework in the note:

| One-year forward EV/EBITDA | x |
|---|---|
| 10-year average | **6.7x** |
| +1 standard deviation | 7.5x |
| -1 standard deviation | 6.0x |
| CLSA target multiple (FY26) | **6.4x** |

Source: CLSA EV/EBITDA history table [3].

- CLSA applies **6.4x** — explicitly described as *"a slight discount to the historic one-year forward EV/Ebitda average over the last 10 years, reflecting low confidence in the outlook"* [4].
- That 6.4x × FY26 EBITDA of A$8,791m gives an EV of A$56,066m, less net debt of A$11,745m, plus A$636m investments, yielding **A$3.95/share** on SOTP [5].
- A separate DCF (WACC 6.8%, TGR 1.5%, beta 0.75) yields **A$4.21/share** [15][6]. The blended (50/50) **A$4.10 TP** sits below the current share price [9].

The key valuation read-through: at A$4.75 the stock has already pushed back **toward its 10-year average** EV/EBITDA, but CLSA's view is that the **fair multiple is below average** because of intensifying competition and software-defined-network (SDN) risks [4][1].

---

## 3. Direct Peer Comp — Telstra vs TPG (the only at-scale ASX-listed peer)

Both notes use the same FY25 CLSA cycle, the same three-analyst team (Basile / Marrin / Zhang), and the same valuation framework — so the comparison is apples-to-apples.

| Metric (CLSA est.) | **Telstra (HLD)** | **TPG Telecom (O-PF)** |
|---|---|---|
| 12M Target Price | A$4.10 (-13.7%) [9] | A$5.80 (+13%) [11] |
| Dividend Yield FY25 | 4.0% [2] | 3.5% [12] |
| PE FY25CL | 24.4x [2] | 60.6x [12] |
| PE FY26CL | 21.3x [2] | 43.0x [12] |
| ROE FY25CL | 15.3% [2] | 1.4% [12] |
| Net debt/equity FY25 | 75.3% [2] | 51.9% [12] |
| DCF WACC | 6.8% [15] | **7.6%** [13] |
| DCF beta | 0.75 [15] | 1.0 [13] |
| Cost of equity | 8.1% [6] | 9.0% [13] |
| Terminal growth | 1.5% [15] | 1.0% [13] |

### What the comp says

- **On a PE basis, Telstra trades at a meaningful discount to TPG** (21.3x FY26 vs 43.0x). However, this is not a "Telstra-is-cheap" story — TPG's optical PE is inflated by a depressed earnings base (FY24 net loss of A$107m, FY25 NPAT just A$157m, vs Telstra's A$2.2bn) [12][2]. On normalized FY27 earnings TPG trades at 27.9x vs Telstra's 20.6x — a gap that narrows but doesn't invert [12][2].
- **On dividend yield, Telstra carries a 50bp premium** (4.0% vs 3.5%) [2][12], reflecting franked-dividend bond-proxy positioning and a higher payout ratio.
- **On risk-adjusted discount rate, the market treats Telstra as the safer asset**: CLSA assigns Telstra a **6.8% WACC with 0.75 beta**, vs **TPG's 7.6% WACC with 1.0 beta** — an 80bp gap that justifies a defensible *premium* multiple for Telstra on EV/EBITDA [15][13]. This is the cleanest single number behind Telstra's relative-valuation premium.
- **On ROE, Telstra is structurally superior**: 15.3% → 18.2% across FY25-27 vs TPG's 1.4% → 3.1% [2][12].

**Net read**: Telstra is not cheap in absolute terms but trades at a **justifiable premium** to TPG on EV/EBITDA-type multiples (and a similar dividend yield) because (a) it is the **incumbent** with dominant mobile share, (b) earnings are 5-10x larger than TPG's and recurring, (c) ROE is 10-15× higher, and (d) the equity beta and required return are demonstrably lower [16][13][15]. CLSA, however, prefers TPG as their actionable telecom call ("**TPG is our preferred exposure amongst our telecom coverage**") because the *delta* in earnings — driven by the Optus network-sharing agreement — sits with TPG, not Telstra [10].

---

## 4. What Justifies the Premium — Bull Pillars

1. **Mobile network leadership / 5G + MVNO franchise.** *"Telstra is Australia's leading telecommunications company, with a dominant market share in mobile services. We expect TLS to hold its market share over time, leveraging its superior 5G network, scale and mobile virtual network operator (MVNO) strategy, helping to underpin group earnings growth"* [7]. This is the textbook incumbent moat that justifies trading toward (rather than below) the 10-year EV/EBITDA average.
2. **Lower equity beta (0.75 vs TPG's 1.0).** A blended 5-year raw/adjusted Bloomberg beta of 0.75 [15] flows through into a 6.8% WACC vs 7.6% for TPG — a structurally lower discount rate that, all else equal, supports ~10-15% higher EV per dollar of EBITDA.
3. **Income/yield characteristics.** 4.0% FY25 yield, growing to 4.6% by FY27 [2], plus continued share buy-backs, anchor the stock as a defensive yield proxy — historically the marginal buyer pays a premium for that.
4. **EPS recovery and rising ROE.** EPS rebounds 38.6% in FY25CL and +14.5% in FY26CL, ROE moves from 10.7% (FY24A) to 18.2% (FY27CL) [2] — the multiple is funded by genuine earnings recovery, not just multiple expansion.
5. **Capital discipline.** Mid-single-digit cash EBIT growth target and >10% ROIC target by FY30, with M&A guardrails (EPS-accretive by year 2, ROI > WACC by year 3) — a credible self-help story justifying a quality premium [8].

---

## 5. What Justifies a Discount (Why CLSA Is Hold, Not Buy)

CLSA's explicit rationale for using **6.4x (a discount to the 6.7x 10-yr average)** rather than the average or +1 SD:

1. **Differentiation risk in "core connectivity."** *"We believe TLS's ability to differentiate its 'core connectivity' offering remains a significant risk to TLS achieving 2030 ROIC targets"* [1].
2. **Software-defined network commoditisation.** *"Increasing adoption of software defined networks to manage telecom networks programmatically may ultimately reduce the relative importance of existing ground infrastructure and gives competition a more equal opportunity at low cost"* — i.e. the value of Telstra's $800m incremental mobile capex falls if SDN reduces the importance of physical infrastructure [1].
3. **Non-exclusive partnerships dilute the moat.** Telstra's Aduna aggregator partnership is **non-exclusive — Singtel and Vodafone (TPG's controlling shareholder) are also signed up** — making it hard for Telstra to differentiate on the new B2B2X "network as a product" channel [1].
4. **Competitive network-sharing.** Higher-priced Telstra products vs peers + risk of churn as the Optus-TPG network-sharing deal closes the network-quality gap [7][10].
5. **Tech risk from LEO satellite, regulation, capex.** Specifically called out as the downside-risk basket that drives the sub-average multiple [16].

These five points together are why CLSA values Telstra at a ~5% discount (6.4x vs 6.7x average EV/EBITDA), arriving at A$3.95 SOTP — even as the DCF supports A$4.21 [4][6].

---

## 6. Bottom Line

- **Where it trades**: ~21x FY26 PE, ~4.4% FY26 yield, roughly its 10-year average EV/EBITDA at ~6.7x [2][3].
- **Premium vs ASX-listed peer (TPG)**: Justified on EV/EBITDA / WACC / ROE basis — incumbency, 0.75 beta vs 1.0, ROE 10-15× higher, and recurring earnings 14x larger [2][12][15][13].
- **Discount vs its own history**: A modest 5% discount to 10-year average EV/EBITDA — justified by SDN/LEO tech risk, non-exclusive partnerships limiting B2B2X differentiation, and the Optus-TPG network-sharing deal narrowing the quality moat [1][4].
- **CLSA's stance**: **HOLD, A$4.10 TP, -8.3% TSR**. The premium is "earned" — but not enough to justify chasing the stock at A$4.75 [9][14]. CLSA's actionable telecom call is **TPG (O-PF)**, where the network-sharing and asset-sale catalysts skew the risk/reward better [10].

---

**Sources**
[1] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — 607960654LinqAlpha.PDF (chunk 13)
[2] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — Financial summary table (chunk 14)
[3] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — EV/EBITDA 10-yr history table (chunk 47)
[4] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — SOTP multiple rationale (chunk 45)
[5] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — EV/EBITDA SOTP calc (chunk 46)
[6] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — DCF valuation inputs table (chunk 53)
[7] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — Investment thesis (chunk 54)
[8] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — Aduna/non-exclusive partnerships (chunk 30)
[9] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — Valuation methodology Figure 3 (chunk 43)
[10] TPG - O-PF (Vodafix) — CLSA (7 May 2025) — Company update / preferred exposure (chunk 10) — 607958214LinqAlpha.PDF
[11] TPG - O-PF (Vodafix) — CLSA (7 May 2025) — Companies mentioned table (chunk 21)
[12] TPG - O-PF (Vodafix) — CLSA (7 May 2025) — Financials summary table (chunk 12)
[13] TPG - O-PF (Vodafix) — CLSA (7 May 2025) — Valuation details / WACC inputs (chunk 17)
[14] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — Investor day commentary (chunk 30)
[15] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — DCF assumptions narrative (chunk 51)
[16] Telstra - HLD (Dreamtime journey) — CLSA (27 May 2025) — Catalysts (chunk 55)

**Note on scope**: All citations are from CLSA internal research notes in the RMS workspace. No qualifying public-data citations were added because the Manticore-side ticker collision (Telstra TLS AU vs Telos Corp TLS US) returned only Telos results in the available filter; and the web-search path required orchestration-guide reading that would have exceeded the remaining turn budget. The CLSA notes themselves contain the explicit peer-comparison framework (Telstra vs TPG vs Singtel/Vodafone via the Aduna partnership), which is the substantive answer to the user's question.

