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Why Telstra could be a safer ASX share to buy right now

A number of industries on the ASX have been harshly impacted by the implications of the coronavirus outbreak here in Australia, with sharp share price declines across the board. These industries include travel and tourism as well as hospitality and entertainment. However, one industry that could potentially benefit is the Aussie telecommunications industry.

Increasing demand for broadband and mobile services

I believe that ASX telco providers such as Telstra Corporation Ltd (ASX: TLS), Optus, Vodafone Hutchison Telecommunications (Aus) Ltd (ASX: HTA), TPG Telecom Ltd (ASX: TPM), Vocus Group Ltd (ASX: VOC) and Amaysim Australia Ltd (ASX: AYS) could potentially benefit from an increase in broadband and mobile usage in both the consumer and business segments over the coming months.

For a start, more people will be required to use social distancing procedures as mass gatherings are banned, so communication will be more important.

Additionally, more employees will be working from home which will see a rise in the usage of home broadband, and some schools and universities are already temporarily shutting down. In fact, Telstra has told all of its Australian-based office staff that can do so, to work from home until at least the end of the month.

In particular, there will be high demand for online streaming services such as Netflix Inc (NASDAQ: NFLX), as consumers watch more movies at home rather than in cinemas.

I think Telstra will particularly benefit amongst our telecommunication providers due to its scale and leadership position. Also, its strong cash flow and balance sheet will position it well to face any short-term market challenges.

Telstra’s T22 strategy well on track

The ASX telco is now well on track to achieve the goals that it had put in place as part of its T22 strategy, as was revealed in Telstra’s first-half results for FY 2020.

The reason the company has implemented this strategy is so it is able to evolve into a leaner, more efficient telco provider in a new era of Australian telecommunications that revolves around the National Broadband Network (NBN).

Before the NBN, Telstra received higher margins from its fixed broadband network, as it was able to offer wholesale services to other providers. However, as the NBN is progressively rolled out, this benefit has been gradually reduced.

Well-positioned to benefit from 5G

Telstra is a world leader in the development of 5G technology. There is a real opportunity for the telco to gain new mobile broadband subscribers from dissatisfied NBN customers when 5G services are eventually launched. 5G has the potential to offer even faster broadband speeds than the NBN, with speeds 7 times the speed of our current 4G network.

Foolish takeaway

With the current high market volatility, I believe that Telstra is worthy of consideration for your ASX buy list due to the relatively strong positioning of the telco market segment in the coronavirus outbreak, along with Telstra’s leadership position.

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Phil Harpur owns shares of Netflix and Telstra Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Netflix. 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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