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TPG Telecom Ltd unlikely to profit from competitive mobile offer

UBS analysts, courtesy of The Australian newspaper, have warned that TPG Telecom Ltd (ASX: TPM) has “overreached” and is unlikely to make money from its aggressive “unlimited” mobile plan.

TPG is investing heavily to become the fourth player in the mobile market. The company has a mobile offer of a competitive plan that will be free for the first six months and then cost $9.99 a month. The catch is that data speed will be capped daily for data over 1 GB. The coverage of TPG is also inferior to Telstra Corporation Ltd (ASX: TLS), Optus and Vodafone. UBS analysts believe that TPG’s new plan, with aggressive promotion will be unlikely to return “a positive net present value”.

The shares are trading on a forward price-earnings- ratio of 13x and the share price is down 1% in a year.

 

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Motley Fool contributor Rosemary Steinfort owns shares of Telstra Limited. 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.

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