As has been established in previous rants, Telstra is the Aussie telco leader. It dominates the market and is able to produce superior profit margins compared to its competitors. So today’s rant is an investigation into who manages this Aussie telco leader and who the telco owners are. Let’s dig in…
Who are the Telco Owners?
Since the complete of the privatization of Telstra in 2007, the government still holds a residual interest of 1.42% in Telstra. Managed funds dominate the list of telco owners with 88.36% while there is little interest from hedge funds at 0.45%. This is good as it demonstrates that Telstra’s stock is not an overcrowded investment idea by the hedge fund industry.
It also makes sense that there is little interest from hedge funds as Telstra is stable business in a mature industry as the industry leader with a fair valuation currently. These type of stocks do not provide the short term gains that hedges funds are looking for.
Ownership of Telstra by management is predominately through remuneration and nothing notable here. Although there was a recent purchase at the current low prices by insider. Director Jane Hemstritch bought 67,500 shares at 5.4465 which represents approximately 350K investment! A good sign that now might be a good buying point.
Interestingly, 37.71% of the telco owners are classified as Australians. A smaller amount than I expected. On the other hand, 32.67% is owned by the U.S. This is predominately through managed funds and represents a doubling since 2010 presumably because of global search for yield.
Overall the board and management seem properly remunerated and competent. Remuneration of the top executives are relatively inline with remuneration offered at competitors Singtel and VHA. There is also a clawback clause which ensures that in the event of losses suffered by Telstra due to inappropriate decisions by management their compensation may be taken back to cover the losses.
Short term (STI) and long term incentives (LTI) are based on relevant metrics and align with other competitors STI and LTI policies. STI is based on FCF, EBITDA, Total Income and Net Promoter Score (NPS). LTI is based on the relative total shareholder return.
- CEO: Andrew Richard Penn (Andy)
- 1.5yrs tenure
- Successor Thodey who was CEO for 6yrs.
- Was CFO for 3yrs before being appointed.
- Part of the Board of Directors.
- $2.325m base remuneration with $6.769m total remuneration.
- 1.2m shares of TLS, shares in the past year have been acquired through exercise rights.
- CFO: Warwick Bray
- 1.5yrs tenure
- Appointed after Andy was appointed the CEO role. Warwick has spent 6 years in Telstra prior to his role as CFO.
- $1.1m base remuneration with $2m total remuneration.
- Group Executives for divisions are relatively new with less than 0.5yrs tenure.
- Chairman: John Patrick Mullen – 0.5yrs tenure
- Current CEO of Asciano Ltd which he has held the role since 2011.
- Has been on the Board of TLS for 8 years.
All information is as of 12 Nov 2016.
Disclose:: I am/we have no positions in TLS, and will not initiate a long position over the next 72 hours.
Disclaimer: : I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. Please note that all investments carry some risk. You should be aware that the value of your managed investment may not increase as quickly as expected, if at all, or that the value may go down. I have no business relationship with any company whose stock is mentioned in this article.