On Wednesday the Telstra Corporation Ltd (ASX: TLS) share price tumbled lower after the ACCC blocked the proposed merger between TPG Telecom Ltd (ASX: TPM) and Vodafone Australia.
The Telstra share price finished the day 2% lower at $3.29.
Is this a buying opportunity?
One leading broker that thinks this is a buying opportunity for investors is Goldman Sachs.
In fact, the broker believes the ACCC's decision is a positive for the telco giant and has lifted its price target to reflect this.
According to the note, the broker has retained its conviction buy rating and lifted its price target by 5% to $3.90. This price target implies upside of over 18% excluding dividends and over 23% including them.
If TPG Telecom and Vodafone Australia are unsuccessful with their appeal in the Federal Court, Goldman Sachs doesn't believe the former will enter the Australian mobile market as a standalone network operator.
This is because the broker continues to estimate a "negative NPV on Australian mobile investments, which has since been exacerbated by the banning of Huawei in Australia."
Instead, it expects the company to either expand its joint venture with Vodafone Australia or on-sell its spectrum assets.
In respect to the former, Goldman believes "TPG could contribute its 700MHz spectrum, small cell network, and potentially some fixed-line infrastructure/capacity, in exchange for an improved MVNO deal with VHA. This could include dedicated mobile network capacity, in the form of a 'fat' MVNO agreement, which could be used by TPG in a fixed-wireless / NBN bypass play."
What about Telstra?
Goldman believes the ACCC's decision is a positive for Telstra.
Not only does this mean another year of distraction for two key competitors, the broker believes the rejection will lead to an improved competitive environment.
Its analysts said: "Should the Federal Court appeal be unsuccessful, TLS will no longer face a stronger number 3, and will continue competing with the standalone fixed/mobile operations of TPM/VHA."
Should you invest?
I think Goldman Sachs makes some great points on the impact of this decision and feel it could now be worth considering a small investment in the telco giant.
