EUR 850.00 For Business Accounts Only

Morningstar | CFO Hangs Up on Telstra to Hang Out at Tesla

Our AUD 4.40 fair value estimate for Telstra remains intact, and we continue to see the stock as undervalued despite the abrupt resignation of Robyn Denholm as chief financial officer just a month into the role. It is an unfortunate distraction for the narrow-moat-rated group that is in the midst of a mammoth transformation program. This is especially as Denholm’s duties (as also the head of strategy) extended beyond the financials, to helping set strategic planning, resource allocation, and handling all aspects of risk management. These responsibilities are critical to Telstra’s fight-back plan for customers, and cutting AUD 2.5 billion in costs as part of a simplification program.

The motivation for Denholm’s departure is credible, and appears to contain nothing sinister as it relates to Telstra. She is resigning to take up the independent chairmanship of Tesla, an opportunity that unexpectedly came up due a governance-related issue involving Elon Musk, the previous chairman and the current chief executive of the electric-car-maker. While her remuneration package has not been revealed, Denholm is likely to be well-compensated, especially in the form of Tesla stock options, not to mention the cachet of being the chairperson of a famed global disruptor in the automotive space. This compares to her current Telstra salary of AUD 1.1 million, which was supplemented with AUD 0.6 million in bonuses in fiscal 2018. And she will have her hands full, overseeing the entrepreneurial entity and its enigmatic CEO—demands that would have precluded her from properly fulfilling her duties at Telstra.

In the meantime, investors can take solace that Denholm will serve out her six-month notice period, giving Telstra time to find her replacement. We believe interest in this high-profile role will be keen and, there is likely to be much resume-refining and LinkedIn updating among senior finance executives in the industry.