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Will the Telstra Corporation Ltd share price outperform in 2016?

Credit: Telstra

The Telstra Corporation Ltd (ASX: TLS) share price had an underwhelming year in 2015, falling 7.4%, so far.

Indeed, the Telstra share price meaningfully underperformed the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which fell just 1.76%. However, those investors who bought in near Telstra’s share price peak in early 2015 could be sitting up to 15% below break even. Undoubtedly, shareholders and investors alike will be questioning whether 2016 will bring more of the same, or if the recent downtrend is an opportune time to stock-up on Telstra shares.

The short answer is: No-one knows for certain where share prices will be in one week, let alone one year.

The long answer is: Telstra could be a worthwhile investment at today’s prices for the long term.

Here’s why…

Telstra remains Australia’s leading telecommunications company, with dominant positions in mobiles, fixed voice, fixed data, eHealth, machine-to-machine communication and networked services.

Competition in fixed voice and fixed data markets is heating up, with the likes of TPG Telecom Ltd (ASX: TPM) and M2 Group Ltd’s (ASX: MTU) Dodo snatching customers.

However, these two business lines are becoming less profitable, and may also be ripe for disruption from newer, more pervasive, technologies like superior mobile networks. For example, Telstra’s rollout of the Wi-Fi 4GX Advanced III, which is six times faster than the National Broadband Network (NBN), has already begun.

Further, Telstra inked a very lucrative deal for the relinquishment of its competitive advantage in fixed connections (e.g. residential broadband) with the NBN Co, when it agreed to sell its copper cables. Telstra is expected to receive the equivalent of $11 billion from the deal – or more.

Admittedly, two areas of concern for Telstra are the changeover to Andy Penn as CEO and the group’s venture into Asia. However, both of these concerns appear overblown, at this stage.

Buy, Hold or Sell?

At $5.59 per share, Telstra is priced to perfection, in my opinion. Indeed, previously, I said the company’s shares would be a buy around $5. At that price, investors would enjoy a wider margin of safety to the true worth of the business than they are afforded today.

A better buy than Telstra

Telstra is slightly outside the buy zone in my opinion, but that's okay with me because in-the-know investors are gearing up to cash in on an even BIGGER tech industry. NOW is the time to get in on the hush-hush industry that could be poised for growth of over 4,463%+ by 2020... And the 1 ASX stock that stands to grow YOUR money right alongside it! Simply click here to learn its name. No credit card details or payment required.

Motley Fool writer/analyst Owen Raszkiewicz has a financial interest in M2 Group.

Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

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