Shares in TPG Telecom Ltd (ASX: TPM) had a fantastic month in September, to say the least. Go back to the start of last month and TPG Telecom shares were hovering around the $6.20 mark, but by 1 October, the same shares were setting investors back $7.09 – a jump of 14.2%.
Although the TPG share price has since pulled back slightly (trading at $7 at the time of writing), it's still been a good month to be a TPG shareholder.
Why have TPG shares been hitting the roof?
Well, it's really about the case sitting before the Federal Court at the current time. Back in May, the ACCC unexpectedly blocked the proposed merger between TPG and Vodafone Australia that both companies had signed. Vodafone Australia is primarily a seller of mobile services and TPG specialises in broadband and NBN internet provision, so a merger of the two businesses was seen as making good sense by both companies' management teams and shareholders alike.
The ACCC's decision surprised many, because an easy case can be made that a stronger competitor in the Telstra Corporation Ltd (ASX: TLS)-dominated Australian telco market would increase industry competition.
However, the ACCC disagreed and remains convinced that TPG CEO David Teoh was planning to build a TPG mobile network regardless of whether the merger takes place. Thus, the ACCC is arguing that it would be better for consumers for TPG to have its own mobile network running alongside Vodafone and Telstra.
TPG subsequently appealed against the ACCC decision and the Federal Court has been hearing from both sides over the last few months and will make a final decision in February 2020.
When the ACCC made the decision to oppose the merger in May, TPG shares tanked almost 15%, but have since recovered all of the lost ground, so clearly the market is expecting the court to rule in TPG's favour – this is the reason, in my opinion, that the TPG share price had such a strong September.
Foolish takeaway
Regardless of whether TPG and Vodafone's merger goes through, I still think TPG is a great company and a good stock to own in the telco space. It doesn't quite offer the same juicy dividend as Telstra – but I think its history of strong growth makes up for it.
