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Telstra Corporation Ltd launches unlimited phone plan

Credit: Telstra

The Telstra Corporation Ltd (ASX: TLS) share price will be under scrutiny this morning after the telco giant announced its first unlimited data phone. I thought the timing of the announcement was quite fortunate considering Telstra suffered an outage of 4G and NBN voice calls across Australia yesterday.

Telstra announced that the new plan will have 40GB of uncapped speeds, but it will then be slowed down to a maximum of 1.5MBps for the rest of the month beyond 40GB. Users will no longer be charged for additional data. However, to me, the actual speed they receive could be so slow that they may as well buy more data.

Of course, 40GB is a lot of data. You would have to be watching a ton of videos to use all that, or be hot-spotting for multiple devices.

The unlimited Telstra plan will cost $69 per month for a 12 month contract, it is not a month-to-month offering.

Vodafone is also launching an unlimited data plan. It has options that cost $60, $80 and $100 for standard speeds for 30GB, 60GB and 100GB and then speed limits apply.

This is a very interesting development – it has been coming for a while considering unlimited plans are already available overseas. I’ve been saying for a while that once truly unlimited phone plans come in, there could be no need for an NBN connection because hot-spotting could provide all the data is needed.

This Telstra plan is essentially still limited because only 40GB will be at 4G speeds, most households would use this in a month (or even a week) if they didn’t have NBN. However, it could see Telstra margins come under renewed pressure because it could generate less revenue for the same amount of data used by customers.

Foolish takeaway

Telstra is trading quite cheaply at only 11x FY18’s estimated earnings with a grossed-up dividend yield of 9.82%. However, until Telstra can demonstrate sustainable revenue and profit growth I won’t be buying any shares.

Instead, I’d much rather buy shares of these solid blue chips for my portfolio.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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.

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