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It’s a good start to the week for Telstra Company Ltée (ASX: TLS) share price.
In morning trading, shares of the telecommunications giant are up 2.5% to $ 3.82.
This means that the Telstra share price is now up 26% year-to-date.
Why is the Telstra share price rising today?
Investors raised Telstra’s share price today after announcing a major acquisition.
According to the statement, Telstra has partnered with the Australian government to acquire South Pacific-based telecommunications company Digicel Pacific.
The two parties have agreed to pay US $ 1.6 billion upfront and up to an additional US $ 250 million, subject to Digicel Pacific’s business performance over the next three years. The good news for Telstra, however, is that the majority of this will be covered by the government.
Although Telstra owns and operates the Digicel business, it will only contribute US $ 270 million to the purchase price of US $ 1.6 billion.
Another positive point, which could push up the Telstra share price, is that the transaction is expected to generate accretive earnings per share. In fact, management believes it will be more accretive than a share buyback.
Telstra Chairman and CEO Andrew Penn commented: “Telstra provided guidance to the market for FY22 during its recent annual results presentation and it also provided aspirations for FY23. These did not include any provision for the acquisition of Digicel Pacific, which will further improve our outlook depending on the completion schedule. “
Speaking of which, completion is expected to take place within the next 3-6 months. However, it remains subject to government and regulatory approvals.
Where will the Digicel activity be integrated?
The statement notes that once the transaction and corporate restructuring of Telstra is completed, the Digicel Pacific company will become a fourth subsidiary of the new holding company Telstra.
It will be overseen by a board of directors controlled by Telstra, which will also include current owner Denis O’Brien and two independent directors.
“We understand the need to ensure that this is a stand-alone business and that Telstra meets its commitments under the T22 and T25 strategies, as well as our intention to grow in the years to come,” said Mr. Penn.
Overall, judging by the performance of Telstra’s share price today, the market appears satisfied with the plan.