The ASX telco shares could get a boost in 2023 as COVID-19 impacts fade away. The factor I'm going to outline in this article could be a boost for Telstra Group Ltd (ASX: TLS) shares and TPG Telecom Ltd (ASX: TPG) shares.
Reopened borders have been useful for names like Qantas Airways Limited (ASX: QAN), IDP Education Ltd (ASX: IEL), and Auckland International Airport Limited (ASX: AIA).
But, interestingly, the telcos could also benefit from a return of visitors.
Tourists to boost telco profit?
According to reporting by the Australian Financial Review, analysts are suggesting that telcos will benefit from growing travel and migration.
More people in the country using telecommunication services, such as tourists using their phones, could boost the earnings and the share prices of Telstra and TPG.
The AFR quoted JPMorgan analyst Mark Busuttil who said:
Prior to COVID-19, mobile subscriber growth was outpacing population … [but] during the pandemic, the total number of mobile subscribers declined: subscriptions numbers [from company reports] declined 2 per cent in FY21 on flat population growth.
We believe there is still some growth to come from international travel.
Mobile subscriptions per person peaked in 2018; therefore, population growth will be the biggest driver of subscriber gains over the longer term. Beyond FY24, when we expect travel to have fully recovered, we have linked our subscriber forecasts to population growth.
We see postpaid services growing to two-thirds of Australian mobile subscriptions by the end of the decade.
In the near term, we expect Telstra to leverage the company's 5G and network leadership position as well as the Optus data breach to grow its number of postpaid subscribers.
While TPG (Vodafone) has the most identifiable international brand which benefits mobile subscribers as international travel returns, the company's key deficiency, which is network quality, remains.
TPG is lagging behind in the 5G race…which will cause a noticeable speed difference between TPG and the competition.
Valuations and dividend yields
I think it's worthwhile looking at the forecasts for both the FY23 and FY24 numbers.
The Telstra share price is valued at 24 times FY23's estimated earnings and 22 times FY24's estimated earnings, according to projections on Commsec.
With the telco starting to grow its dividend to investors, it could offer an FY23 grossed-up dividend yield of 5.9% and 6.3% for FY24.
Meanwhile, the TPG share price is valued at 35 times FY23's estimated earnings and 24 times FY24's estimated earnings.
TPG could pay a grossed-up dividend yield of 5.5% in FY23 and 6.4% in FY24.
