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Can 5G save Telstra Corporation Ltd?

Credit: Telstra

Back in July 2015 the Telstra Corporation Ltd (ASX: TLS) share price was trading at around $6.50.

Since then, Telstra shares have lost more than half their value after closing on Thursday at $2.82.

It’s a similar story for other ASX-listed telecommunications providers. Vocus Group Ltd (ASX: VOC) shareholders have watched their stock sink, shedding more than 30% over the past year. Although,TPG Telecom Ltd (ASX: TPG) shareholders had a relatively good year with returns exceeding 3% over that period.

While the last few years have been far from spectacular for shareholders of Australia’s telecommunications providers, it seems things are set to change.

In February, Telstra opened its 5G Innovation Centre for testing of next generation technologies. A 5G equipped car sporting a Telstra logo was seen driving near the centre shortly after and the impact of 5G on gaming was also demonstrated.

While these developments may come across as publicity stunts, they also demonstrate something very real: 5G has arrived and it’s already changing the way consumers behave.

For instance, I’m on the market for a new phone. But wouldn’t I be better off waiting for the new technology to rollout rather than purchasing a product that will soon be almost obsolete? And it seems I’m not alone with that thought.

According to research conducted by technology firm Telsyte, 4.3 million smart phones were sold in the first half of 2018 in Australia, a decline of 3.7% on the 4.4 million smart phones sold during the prior corresponding period.

Some are tipping that trend to continue with an increasing number of people expected to delay phone upgrades as the arrival of the new technology approaches.

In the short term telecommunications companies may suffer as a result.

But that trend is expected to reverse upon rollout of the 5G network and is likely to benefit Telstra shareholders.

Telstra appears to be leading the way in 5G technology in Australia. Some are confident Australia’s largest telecommunications provider is well placed to profit from the imminent technological shift; Morgans has raised its price target on Telstra shares to $3.47.

All this means that at today’s price of $2.82, Telstra looks like a buy in my opinion.

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It's been a nail-biter of a reporting season here in the first half of 2018.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited, TPG Telecom Limited, and Vocus Communications 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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