‘Competition is key’: Why Telstra shares are in the ACCC naughty corner today

Here’s why the ACCC isn’t too happy with Telstra today.

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Key points

  • The Telstra share price is swapping hands at $3.95 this afternoon, 0.5% lower 
  • Australia's corporate watchdog is enforcing the telco giant to deregister any sites that would inhibit Optus' 5G rollout 
  • The outcome comes as deliberation continues on Telstra's agreement with TPG 

Telstra Corporation Ltd (ASX: TLS) shares are trading sideways this afternoon after an update in relation to competition concerns.

The Australian Competition and Consumer Commission (ACCC) must have Telstra on speed dial at this point. Australia’s largest telecommunications network has been dealing with the corporate watchdog over a raft of matters. One such example is Telstra’s proposed acquisition of a majority stake in Fetch TV, which received the regulatory green light last month.

However, today’s news revolves around a ‘court-enforceable’ undertaking to level the playing field across the 5G network.

What are the consequences of not playing fair?

On Wednesday afternoon, the ACCC announced its acceptance of an undertaking to address actions taken by Telstra. These actions concern the all-important 5G network in Australia, a key growth pillar for telco operators.

According to the release, Telstra registered radiocommunications sites in the low band spectrum. Following an investigation, the corporate watchdog believes these registrations were made in a bid to impede Optus’ 5G rollout efforts.

The country’s corporate regulatory body came to this decision in part based on Telstra’s registration of 315 sites in the 900 MHz band after learning that Optus intended on applying for and utilising the 900 MHz band.

At the time of the undertaking, Telstra had deregistered 153 of the radiocommunications sites. However, Telstra will now need to deregister all remaining sites that would have constituted an obstacle to Optus’ rollout. Investors don’t appear to be pleased with the news, as Telstra shares dip lower today.

Commenting on the decision, ACCC commissioner Liza Carver stated:

Telstra’s undertaking will ensure Optus is not hindered from expanding its 5G rollout, giving more Australians access to a choice of 5G services in regional and metropolitan Australia. Telstra’s undertaking promptly addresses the ACCC’s competition concerns and stops the likely harm to competition and consumers quickly. It is an efficient and effective way to achieve a positive market outcome.

The outcome arrives while the verdict is still out on Telstra and TPG Telecom Ltd‘s (ASX: TPG) strategic tie-up.

Telstra shares in the spotlight

While the Telstra share price is in the red today, the company’s shares have faired reasonably well over the past year.

The S&P/ASX 200 Index (ASX: XJO) has slipped 6.7% over the past 12 months. Meanwhile, the telecom giant has served up an honourable 5.2% gain.

Oddly enough, this hasn’t coincided with an increase in earnings. Therefore, the increase in valuation has resulted in an expansion of the company’s price-to-earnings (P/E) ratio. At the present Telstra share price, the company trades on a 32.1 P/E.

Motley Fool contributor Mitchell Lawler 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.

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