The Vocus Group Ltd (ASX: VOC) share price and TPG Telecom Ltd (ASX: TPM) share price may be a buy for the long run.
Vocus Group
You may not have heard the name Vocus but it is the owner of telecommunications brands like Dodo, Primus, Eftel, NextGen, Amcom and more. With a national network of fibre cabling, Vocus offers its corporate customers super-fast access to secure networks. Smaller businesses and retail clients also have access to a growing suite of products. For example, Dodo is pushing into utility services like electricity and gas, and also has its eyes on the mobiles market.
Like Telstra Corporation Ltd (ASX: TLS), TPG Telecom and others, the Vocus Group share price has been sold off in recent times. However, with a generous dividend and modest profit growth on offer, I think the current price looks tempting.
TPG Telecom
As noted, TPG Telecom shares have been sold off for similar reasons to Vocus. TPG Telecom is a popular household name offering broadband, home phone and – more recently – mobile services. TPG Telecom is extremely well run, but investors appear to be unenthused by the slower-than-expected growth in the industry, as well as the potential for telecommunications prices to depreciate.
For example, companies are offering unlimited broadband and home phone for (in some cases) $50 per month, so prices can really only go lower from here. The next frontier for telcos is bundling, like internet plus mobile plus electricity. However, the market is already very competitive.
Nonetheless, I think the risk of an all-out price war is quite low. I think prices will go lower but I also believe TPG has plenty to offer. For example, its acquisition of iiNet could bring more benefits, its Singaporean expansion is a bonus and its infrastructure could provide additional upside over time.
Foolish Takeaway
I'd buy Vocus and TPG Telecom shares before I bought shares of, say, Commonwealth Bank of Australia (ASX: CBA) or Wesfarmers Ltd (ASX: WES) at today's prices. While risks persist, I think both companies could offer decent share price growth and dividend income over the next five years.
