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Should you buy Telstra Corporation shares after its 5G spectrum auction update?

The Telstra Corporation Ltd (ASX: TLS) share price will be on watch on Monday after the telco giant provided an update on the 3.6 GHz spectrum auction held by the Australian Communications and Media Authority.

According to the release, Telstra has demonstrated its 5G commitment by investing $386 million to secure 30-80 MHz nationwide in the 5G spectrum auction.

Combined with existing holdings, this purchase means that Telstra now has 60 MHz of contiguous 5G spectrum in all major capital cities and between 50-80 MHz of contiguous 5G spectrum in all regional areas.

Telstra’s CEO, Andrew Penn, believes that this means the company will continue to lead the way in bringing 5G capabilities and super-fast connections to Australians in cities and regional areas.

He said, “This is an extremely significant moment for Telstra and as we set out last week at our Investor Day, 5G will bring enormous opportunities for growth. This is also a significant investment in the nation’s future connectivity, including large holding of regional spectrum, demonstrating our continued commitment to bring the latest technology to Australians in regional areas.”

Before adding that, “Telstra is leading the way in working with suppliers and international standard bodies to develop the 5G ecosystem. This will enable us to provide the data, connectivity, low latency and speed necessary to enable new products and services that will radically alter the way we do business, consume content and connect with each other.”

Mr Penn advised that the company was “very pleased with the outcome of the auction, both in terms of the spectrum we have secured and the overall way the auction was conducted.”

Should you invest?

I think this is a positive development for Telstra and believe it puts it firmly ahead of competitors Optus, TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC) in the 5G race.

But while I’m optimistic that 5G will provide Telstra with incremental revenue opportunities in the coming years, it won’t positively impact its near-term financial performance.

So once again, I’d class Telstra as a hold until it has clarified that its financial performance in FY 2019 will be sufficient to maintain its current dividend.

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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. The Motley Fool Australia has recommended 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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