The Motley Fool

The TPG share price may be a good buy during coronavirus volatility

The TPG Telecom Ltd (ASX: TPM) share price could be a good buy during this coronavirus share volatility.

The TPG share price has only fallen by 11% since 20 February 2020, which is nowhere near as painful as plenty of other blue chips.

There are a couple of key reasons to think about TPG during this coronavirus share market volatility:

Defensive earnings

Australia is not in lockdown mode. But plenty of people are working from home or choosing to stay at home to avoid the coronavirus, limit the spread and skip the supermarket chaos.

The internet is extremely important for our modern way of life. If you’re stuck at home you’re probably going to need the internet for your work or entertainment. It’s just one of those things that you have to pay. 

You can imagine that most households will keep paying their internet bill during this (and beyond, of course). It’s a necessity. 

The NBN can provide a reliable internet connection, whereas the mobile networks may not be equipped to deal with such high demand.

I think TPG will be one of the businesses that may see its operations affected least during this period, except for the businesses seeing an increase in demand such as Bubs Australia Ltd (ASX: BUB).

Merger with Vodafone Australia

Just before the outbreak hit the world TPG finally got the go-ahead to merge with Vodafone Australia.

The combination of the two businesses should mean a lot of attractive synergies such as removing the need to build two mobile networks, the reduction of costs and having the chance to cross-sell between customer bases.

The merger puts the two businesses in a much stronger position to take on Optus and Telstra Corporation Ltd (ASX: TLS) in the future.

Foolish takeaway

TPG is in the right industry to get through this relatively unscathed and it will be well positioned to profit from 5G as it’s rolled out across the country. The dividend yield from the combined business is expected to be higher than previously from just TPG.

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Motley Fool contributor Tristan Harrison 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 BUBS AUST FPO. 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.