MENU

Which telco shares should you buy?

The telecommunications sector has been a difficult part of the market to invest in over the last 18 months.

Almost all shares in the industry have tumbled significantly lower during this time. Has this created a buying opportunity?

Amaysim Australia Ltd (ASX: AYS)

I thought that this junior telco company turned in a hugely disappointing half-year result in February. Although revenue more than doubled to $294 million, its earnings before interest, tax, depreciation, and amortisation (EBITDA) sank 41% to $10.2 million. The main culprit for this decline was its mobile business which saw EBITDA drop from $17.27 million to $5.66 million. Amaysim also more than doubled its net loss to $2.38 million and cancelled its dividend. I intend to stay clear of the company until there is a major improvement in its financial performance.

Telstra Corporation Ltd (ASX: TLS)

This telco giant’s shares fell to a multi-year low of $3.11 on Wednesday, stretching their 12-month decline to a sizeable 33%. While there is no guarantee that its decline is over, I do think that its shares look highly attractive at current levels. Especially if the Federal Government writes down the value of the NBN, allowing providers to have more generous margins. This and 5G internet could be just what Telstra needs to maintain its 22 cents per share dividend. This dividend provides a fully franked trailing 7% yield at the current share price.

TPG Telecom Ltd (ASX: TPM)

This telco company has also fallen significantly over the last 12 months. While I prefer Telstra over TPG Telecom, I do see a fair bit of value in its shares at the moment. Though, ultimately, a lot will depend on the success of its mobile launch. If TPG Telecom can win a decent share of the market then it could generate strong sales and earnings growth for many years to come. I would, however, suggest investors hang back and wait to see how it performs.

OUR #1 dividend pick for April is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited and TPG Telecom 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.