MENU

The Telstra share price fell 23% in 2018

It was another disappointing year of trade for the Telstra Corporation Ltd (ASX: TLS) share price in 2018.

Investors once again sold off the telco giant’s shares, leading to a sizeable decline of 23% excluding dividends.

Why did the Telstra share price fall 23% in 2018?

There have been countless reasons for Telstra’s share price decline over the last 12 months.

Chief among them is the concern that Telstra’s 22 cents per share dividend is not sustainable and will be cut in FY 2019.

The market doesn’t appear convinced that the company will be able to generate strong enough cash flows to maintain its current dividend due to margin pressures caused by increasing competition and high NBN wholesale rates.

At its annual general meeting Telstra’s CEO, Andy Penn, complained about NBN wholesale rates.

He said: “The price we charge our competitors for access to our network, when they provide broadband services to their customers, is set by the ACCC. On an equivalent basis to the NBN, this is currently in the order of $20 per month per customer.”

Whereas the average wholesale price “currently being charged by NBN Co to the industry is $44 per month per customer, more than double and their plan is to increase this further to $51 by FY22.”

Mr Penn has requested a cut of at least $20 to wholesale rates, but NBN Co dismissed this request.

The telco giant was recently dealt another blow when the ACCC voiced concerns over the planned merger of TPG Telecom Ltd (ASX: TPM) and Vodafone Australia.

The competition watchdog believes that the merger could lead to the lessening of competition in the mobile and home broadband market, which is something that Telstra and rival Vocus Group Ltd (ASX: VOC) could have benefited from.

The ACCC will make its final decision on the merger until March, but I’m not overly optimistic that it will go ahead.

What now?

I’m staying away from Telstra’s shares until it has made its dividend plans for FY 2019 clear at its half year results in February and the ACCC has made its decision on the TPG-Vodafone merger in March.

I feel both these events will have a big say in whether the Telstra share price outperforms or underperforms the market again in 2019.

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.

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…

Including:

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!