MENU

I’d consider this ASX share before Telstra Corporation Ltd

The Telstra Corporation Ltd (ASX: TLS) share price has been crunched over recent weeks, but I’d buy Vocus Group Ltd (ASX: VOC) shares first.

TLS share price

Source: Google Finance

As can be seen in the chart above, Telstra shares have been whacked over the past year. Meanwhile, the broader Australian sharemarket, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), has risen 11.6%.

Telstra’s most recent selloff comes as its rival, TPG Telecom Ltd (ASX: TPM), won an auction for new mobile network spectrum. Having successfully challenged Telstra in the broadband and home phone market, TPG plans to roll out its mobile network with a very low price point.

Up until the announcement last week, Telstra’s mobile network was seen as the jewel in the crown of the $50 billion telecommunications heavyweight. This is especially true given the rollout of the National Broadband Network (NBN), which will see Telstra become a retailer (as opposed to the owner) of fixed internet infrastructure.

But these developments were a long time coming, so if you asked me three months ago if I would buy Telstra shares for $4, I would have been very tempted. I have said for years that Telstra would be good value below $4 per share.

Indeed, even if TPG can steal some market share away from Telstra I think it is more likely to affect Optus and Vodafone because Telstra will still have appeal as the premier network provider. That’s why I continue to believe Telstra could be a worthy investment at the right price.

However, there is another ASX share I’d buy first…

Vocus is the name behind Dodo, iPrimus, Commander and much more. And while Telstra’s share price has fallen 23% in a year, Vocus’ has fallen 62%!

Vocus is a retailer of internet products in Australia and New Zealand, to both corporate and consumer customers. It also owns valuable network infrastructure and sells complementary products like mobiles, electricity, gas, and insurance. The ability to bundle products is a key growth strategy for the company.

And following numerous acquisitions, the company is also expected to generate cost savings by integrating its businesses, including M2 Group and NextGen.

Foolish Takeaway

If you wanted to add a little spice to your investments and have a high-risk tolerance, you could take out a loan with tax deductible interest repayments to buy Telstra shares, which are tipped to pay a tax-effective dividend of 7.4%.

However, for my money, Vocus shares look good at today’s prices — they also pay a potentially tax-effective dividend of 4.3%.

Thinking of buying Telstra shares? You should try these 3 blue chip dividend share ideas first.

Just, click here, enter your email address and we'll send you our expert analyst's research report -- completely free.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen encourages your feedback. You can follow him on Twitter @OwenRask.

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.