Telstra & TPG, Who Will Win Share?

TPG has confirmed its intention to build a fourth mobile network in Australia with its successful A$1.26bn acquisition of two 10MHz spectrum licenses in the most recent Government tender. The market’s reaction has been savage, with the share price of the dominant incumbent operator Telstra, falling by almost 10 per cent since TPG’s announcement.

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Telstra’s Losing Muscle

Just when baby boomers are pouring their hard-earned savings into Telstra’s (ASX: TLS) high dividend yields, the Australian Competition and Consumer Commission (ACCC) has announced a price change for regulated infrastructure that weakens the company’s moat. It therefore has more meaningful financial implications – through long-term valuations – than the immediate impact on prices.

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Does Telstra Still Stack Up?

Telstra is clearly the largest domestic telecommunication company, leading the market in domestic fixed voice, broadband and mobile services. Given the size, scale, market share and longevity Telstra is in a strong position to dominate the industry. But with all its size and brand recognition, Telstra hasn’t been spared the vitriol of the market in its time. In years past the business has been accused of a certain lethargy, squandering its market dominate position in the face of stubbornly high costs and an unproductive workforce.

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