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Why the Telstra Corporation Ltd share price has been smacked today

Source: Telstra presentation

The Telstra Corporation Ltd (ASX: TLS) share price has been absolutely hammered today on news that TPG Telecom Ltd (ASX: TPM) is set to enter the mobile sector.

If you own Telstra shares, you may want to look away now…

Source: Google Finance

The Telstra share price dropped as much as 7.2% this morning – the most in three years – to a low of $4.23. It has since rebounded marginally to trade 6.4% lower at $4.27, but that will come as little consolation to shareholders.

Telstra is by and large Australia’s dominant telco, ahead of Vodafone and Optus. The entry of a fourth major mobile operator, being TPG, could see customers leave those established networks in favour of the new one. The additional competition could also force prices to drop, which would do no favours for Telstra’s bottom line.

There are already concerns regarding Telstra’s ability to continue growing profits and to increase – or even maintain – its dividend, so it’s hardly surprising to see the group’s share price fall so sharply following today’s news.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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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