ACCC mobile decision boosts the Telstra Corporation Ltd share price

The ACCC has proposed that it will not declare a wholesale domestic mobile roaming network, which is music to the ears of the Telstra Corporation Ltd (ASX:TLS) share price.

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The Telstra Corporation Ltd (ASX: TLS) share price is flying higher following an ACCC proposal that it will not declare a wholesale mobile roaming network.

While the Telstra share price is sure to benefit over time, Optus, Vodafone and the TPG Telecom Ltd (ASX: TPM) share price and Vocus Group Ltd (ASX: VOC) share price could come under pressure as a result.

Wait, what?

Basically, the ACCC was reviewing calls for open access to Telstra's extensive mobile network. Such a move would require the likes of TPG to pay a fee to Telstra for allowing its customers access to the network, similar to the way other telco's used Telstra's copper cable broadband network. Obviously, such a decision would have been a blow for Telstra because it would have lost its competitive advantage.

However, today's announcement is promising for Telstra because the ACCC found that open access may actually increase prices for rural customers because wholesale network access prices would be passed along to customers.

"The ACCC has insufficient evidence that declaration will improve the current state of competition overall," ACCC Chairman Rod Sims said.

"We are extremely conscious of the fact that in regional, rural and remote areas, mobile coverage and choice of service provider are vital issues," Sims added. "While declaration may deliver choice for more consumers, declaration has the potential to make some consumers worse off."

Likely to be worst-affected by the changes are Vodafone and TPG Telecom. TPG is planning to roll out a low-cost mobile network across Australia to complement its success in offering broadband products.

Some investors have grown concerned that Telstra would lose customers to TPG over time.

However, it has always been more likely that the likes of Vodafone and Optus would be hurt more by TPG's push, given that the second-tier providers lack the network coverage and reliability of Telstra — which many customers (especially rural customers) need.

What now?

The proposal by the ACCC is just a proposal or draft. So despite undertaking rigorous research of rural communities, the ACCC will not make its final decision until mid-2017.

"We are very keen to get comments from a broad range of stakeholders on our draft decision announced today, including on these measures," Mr Sims said. "We will carefully consider all feedback before making our final decision in mid-2017."

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Telstra Limited. The Motley Fool Australia owns shares of TPG Telecom Limited and Vocus Communications Limited. 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.

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