Telstra share price rises as Optus folds to inflation

Telstra’s shares are having a positive day. Here’s why…

| More on:
A female executive smiles as she carries out business on her mobile phone.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Telstra's shares are rising on Wednesday
  • This follows news that Optus is lifting prices to combat inflation
  • Goldman Sachs expects this to support a rational mobile market.

The Telstra Corporation Ltd (ASX: TLS) share price is on form on Wednesday.

In afternoon trade, the telco giant’s shares are up 1.5% to $3.95.

Why is the Telstra share price rising?

The catalyst for the rise in the Telstra share price today appears to be news that Optus is lifting the prices of its legacy mobile plans.

Optus has informed customers on its legacy $39/$49/$59 plans that pricing will increase $4 per month from 8 August to $43/$53/$63, respectively. The telco explained that the higher pricing was justified because of ongoing network investment and cost inflation.

Why is this good news?

Goldman Sachs highlights that this is good news for Telstra, which also announced price increases recently, because it “is another positive sign supporting a rational mobile market.”

And while Optus has yet to increase its in-market pricing, the broker expects this to happen before the end of the year.

Furthermore, although TPG Telecom Ltd (ASX: TPG) has not followed suit yet, Goldman isn’t overly surprised. This is because the ACCC is currently looking at its proposed Multi-Operator Core Network (MOCN) deal with Telstra.

Goldman explained:

We expect TPG will wait until early 2023 before making a decision. At this point its proposed MOCN deal with Telstra will have been implemented if successful (ACCC ruling due by 17th October), and the company will face the choice of targeting ARPU growth or market share. Commentary at its recent Investor Day was non-committal on this, which we see as unsurprising given the ongoing ACCC review.

Are Telstra’s shares a buy?

Goldman Sachs currently has a neutral rating on Telstra’s shares. However, with a price target of $4.30, this still implies potential upside of 9% for investors.

And if you include dividends, the potential total return stretches to approximately 13% over the next 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Communication Shares

A woman standing in a blue shirt smiles as she uses her mobile phone to text message someone
Communication Shares

The Telstra share price is still trading 50% off its all-time high. Is right now a good time to buy?

Are Telstra shares a post-earnings buy today?

Read more »

A well-dressed woman wearing a headset and mic looks grumpily at the camera.
Communication Shares

Seven West Media share price tumbles 5% on full-year earnings

The market is reacting poorly to what the company's CEO labelled its best financial result in a decade.

Read more »

a woman in business wear looks at her phone against the window of a high rise space with a city landscape view of tall buildings outside.
Communication Shares

Own Telstra shares? How the telco is tackling inflation pressures

Telstra has some ‘natural hedges’ against inflation.

Read more »

A businesswoman weighs up the stack of cash she receives, with the pile in one hand significantly more than the other hand.
Dividend Investing

Everything you need to know about the latest Telstra dividend

How big will the Telstra dividend be?

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Communication Shares

Telstra share price higher on earnings beat and surprise dividend increase

Telstra's shares are having a strong day on Thursday. Here's why...

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Earnings Results

Telstra share price on watch amid strong FY22 result and surprise dividend increase

Telstra has released its FY 2022 results...

Read more »

a happy investor, in this case an older gentleman, throws his head back and laughs while reading the newspaper in his garden.
Earnings Results

News Corporation share price flies 6% higher on  FY22 earnings surge

It's been a good year for the global media giant.

Read more »

A farmer stands in a field using his mobile phone
Communication Shares

‘Wouldn’t have been on my radar previously’: Why WAM likes Telstra shares right now

Telstra finally has green shoots of growth.

Read more »