Australia's biggest telecom, Telstra Corporation Ltd (ASX: TLS) has undergone something of a reversal in recent months. Earlier in 2015, its share price was north of $6 and it seemed only a matter of time before yield-hungry investors pushed shares to $7.
Now, they change hands for $5.23 – down 8% for the year – and many investors will be wondering if they're headed lower.
Recent consolidations among other telco players Vocus Communications Limited (ASX: VOC) and TPG Telecom Ltd (ASX: TPG) have ignited fears that these players could become large enough to challenge Telstra's dominance of Australia's data market.
These fears are not unfounded and I suspect that Telstra shares could have further to fall in the near term, especially once some updates on subscriber numbers and market share come in from Vocus and TPG.
However, TPG (Telstra's closest competitor) is still a long way short of becoming a serious threat, and Telstra has a number of positive attributes that will stand it in good stead over the long term.
In addition to a rock-solid balance sheet, Telstra is expanding in Asia and aims to grow the revenue from this region significantly in the next decade or so. Telstra has a track record of success in this region already, and I expect the group to continue making headway on its goals.
Telstra also remains the leader in Australia's mobile market by a significant margin, and in fact, has been taking market share – while maintaining margins – from rivals in recent times, instead of the other way around. This is not the sign of a company suffering from competition.
As Australia's largest mobile and fixed data provider, Telstra also has its finger on the pulse of future developments in the industry, such as machine-to-machine (M2M) communication and eHealth, among others. The telco has also reportedly developed a wireless broadband router that is up to 6 times faster than the NBN.
It's impossible to know for sure if Telstra will dip below $5 in the near-term, but I would suggest that if it does, it might be an excellent time to start buying.
