Is the Telstra Corporation Ltd (ASX:TLS) share price a buy?

The Telstra Corporation Ltd (ASX: TLS) share price has been a bit of a rollercoaster over the past year. It’s down 16% over the past 12 months but up nearly 19% since the start of FY19 to $3.11.

Telstra has recovered strongly in recent months due to the merger announcement of two of its key rivals TPG Telecom Ltd (ASX: TPM) and Hutchison Telecommunications (Aus) Ltd (ASX: HTA).

Two rivals forming to become a much bigger competitor sounds bad for Telstra, right? The combined business will have stronger economies of scale, it will only need to build one 5G network instead of two and it will have more financial clout.

But, Telstra backers believe that the merger will mean less price competition, particularly considering TPG was promising to launch its mobile service with extremely low prices.

Telstra has been suffering under the weight of competition over the past couple of years. Data is a commodity that doesn’t really cost any more to deliver the customer 1GB or 10GB. Smaller low-cost competitors have been steadily chipping away at Telstra, leading to Telstra increasing the value of its own packages – decreasing margins.

The NBN is another sore point for Telstra. It lost its profitable control of the infrastructure and now has to compete on an (almost) even footing with lots of other telcos. Its main advantage, other than brand power, is its size. It’s offering the same product but Telstra has an advantage with economies of scale for every other aspect like customer service.

Until 5G comes along I can’t see Telstra turning around its fortunes any time soon. By that, I mean I can’t see Telstra being able to sustainably grow its profit in the next couple of years.

Foolish takeaway

For me, I’m only interested in a share if it’s either really good value (and offers some sort of growth) or it’s got excellent long-term growth potential. Telstra doesn’t fit into either of those boxes. Its grossed-up dividend yield of 10% looks attractive, but there’s no guarantee the dividend won’t be reduced further if earnings keeps falling. I’m avoiding owning Telstra.

Instead, I’d much rather buy these top shares for my portfolio. They all have solid histories of earnings growth and also pay decent dividends.

3 Top Shares To Buy In September

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

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 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!