MENU

The ACCC could be about to smash the Telstra Corporation Ltd share price

The Telstra Corporation Ltd (ASX: TLS) share price could post another big fall later this month with the Australian Competition and Consumer Commission (ACCC) set to rule on whether access to Australia’s mobile networks should be opened up to the benefit of consumers.

Telstra currently has by far the widest mobile network coverage especially across regional Australia, which allows it to charge a price premium to consumers often in remote regions who have little choice but to use Telstra’s networks if they want to receive mobile coverage.

However, other network operators such as Vodafone Australia, TPG Telecom Ltd (ASX: TPM) and Macquarie Telecom Group Ltd (ASX: MAQ) have been lobbying the ACCC to force Telstra to provide them roaming access to its networks in return for fee payments.

Given that the ACCC’s central mandate is to promote consumers’ rights and competition on an equitable basis it may rule in favour of the junior telcos’ arguments that a roaming deal is compatible with competition laws in Australia.

Telstra argues that it has no obligation to share its networks with rivals given it has invested its own capex in the network infrastructure and retains plans to invest further in regional roaming.

Over the past few years the Federal government has also committed $600 million of its own money towards improving mobile coverage in regional Australia, with a further $60 million expected to be allocated this year.

Winners and losers ahead for investors

According to reports in The Australian paper, Goldman Sachs has forecast that Telstra could lose $546 million in full year earnings for FY 2018 if the ACCC rules against it.

This is a frightening prospect for Telstra and its investors, while a decision in favour of roaming would also likely boost the TPG share price after it recently announced its intention to move into the mobile business.

Moreover, speculation remains that TPG’s deal-making founder intends to merge with Vodafone Australia. The two groups are already joined at the hip via a $1 billion worth of commercial agreements, whereby TPG provides Vodafone dark fibre services for the next 15 years in return for other network services sharing agreements.

TPG’s move into mobile and potential merger with Vodafone Australia being scenarios I have flagged multiple times over the past year, with Vodafone Australia’s joint-venture owners the Cheung Kong Hutchison Group and Vodafone Plc potentially agreeing to merge with TPG if its founder comes up with an offer too good to refuse.

Given the rising competition and Telstra’s typically glacial speed in responding to it, I’m not a buyer of its shares at today’s knocked-down prices.

TPG shares though look a buy to me given its cheap valuation, multiple growth levers, the heavy insider ownership of shares and likelihood of an attempted full-blown merger with Vodafone Australia.

You might want to forget about Telstra for your dividend payments...Especially because we've just released our #1 dividend pick to buy now. And the winner is...

With its shares up 155% in just the last five years, this 'under the radar' consumer favourite is both a hot growth stock AND our expert's #1 dividend pick for 2017. Now we're pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is click the link below!

Simply click here to receive your copy of our brand-new FREE report, "The Motley Fool's Top Dividend Stock for 2017."

Motley Fool contributor Tom Richardson owns shares of TPG Telecom Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.