Like most ASX 200 stocks today, TPG Telecom Ltd (ASX: TPM) shares have taken a haircut. TPG shares closed trade yesterday at $6.77 but opened this morning at $6.65 and are now swapping hand s for $6.58 at the time of writing – a one-day drop of 2.73%. The company has seen modest share price growth of around 4.3% for the year so far, which pales in comparison to its telco arch-rival Telstra Corporation Ltd (ASX: TLS), which has seen its share price rise by an astonishing 40% since January. Does this mean TPG might be a telco value play? Let’s take a look…
What has TPG been up to?
If you pull up a graph of the YTD performance of TPG shares, it resembles something you might ride at Disneyland. TPG has been plagued by a few ‘unfortunate events’ this year. Firstly, its plans to merge with rival telco Vodafone have been blocked by the ACCC on market concentration concerns. As TPG is more concentrated in the fixed-line/broadband sector and Vodafone in mobile services, the merger would have allowed TPG to build a more formidable total-market presence, but alas for TPG, it remains dead in the water (for now, at least).
Secondly, TPG’s plans to build a 5G network in Australia have also been put on ice by the Federal Government. TPG had planned on using 5G equipment supplied by Chinese telco Huawei – that was until the government banned Huawei’s involvement in Australian telecommunications infrastructure, citing national security concerns.
A Foolish Takeaway – Is TPG a buy today?
These setbacks for the company have resulted in the mixed performance of TPG shares over the year so far, and the company has yet to offer a revised comprehensive plan for its future direction. Saying this, TPG has long been a price-setter in the telco space and its low-cost plans along with its innovative marketing campaigns have seen it gain significant traction in the market over the last decade.
I think TPG is a quality company that will continue to deliver solid performance, but I would like to have a firmer idea on the company’s long-term plans before making an investment at current prices.
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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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.