What does the Optus fumble mean for ASX telco shares?

Experts are already tallying up the numbers on how much Optus' troubles could boost rivals.

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As Optus begins to pick up the pieces after its 14-hour-long outage on Wednesday, pundits are analysing what the debacle means for rival ASX telco shares.

Laying claim to around 10 million customers nationwide, Optus ranks second in market share at around 31%. However, the telecommunications company may see its share of the pie shrink as competitors capitalise on its recent mishap.

Sales surge for ASX telco shares at Optus' cost

Optus has garnered unwanted attention only a year after a damaging data breach.

According to subsequent reports, around 10% of Optus customers switched networks after the cyber attack. If I've done my math correctly, that means the large majority (90%) stuck with the Singtel-owned network operator.

Yet, it seems Wednesday's outage is the straw that broke the camel's back for some who gave Optus a second chance.

As reported by 9 News, TPG Telecom Ltd (ASX: TPG) — and its various brands — experienced its busiest sales day in the last year. A spokesperson from Vodafone (a subsidiary of TPG) noted a four-fold increase in activity amid Optus' network nightmare.

$4.71 $-0.01 (-0.2%) Friday, 1 December 2023 at 4:00:00 pm Australian Eastern Daylight Time

Likewise, the mobile offering from Kogan.com Ltd (ASX: KGN) — aptly named Kogan Mobile — reported a 400% rise in eSim sales on Wednesday. A Kogan spokesperson said, "It was actually Kogan Mobile's highest volume of eSim sales in a day this financial year."

$5.12 $-0.11 (-2.1%) Friday, 1 December 2023 at 4:00:00 pm Australian Eastern Daylight Time

What about Optus' biggest competitor, Telstra Group Ltd (ASX: TLS)? Analysts at JP Morgan believe even if 2.5% of Optus customers switch to Telstra, the larger ASX telco share could see its earnings before interest, taxes, depreciation, and amortisation (EBITDA) boosted by $125 million in FY25.

The Telstra share price lifted 1.29% amid the mid-week fiasco.

Will the big contracts cut the cord?

A significant risk (or potential reward for competing ASX telco shares) still hangs in the air for Optus.

While an outflow of everyday customers would hurt, the most devastating fallout for the Singaporean telco could be the possible loss of corporate and government contracts. These include deals with the Department of Defence, major banks, and the South Australian Government.

We're talking big contracts here. For example, Optus won a contract for satellite connectivity last year with the Department of Defence worth $405 million.

This could present an enormous opportunity for ASX telco shares if they snatch these often higher margin contracts off of Optus. However, nothing has materialised yet, with much of the situation still unfolding.

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 positions in and has recommended Kogan.com. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Kogan.com and Tpg Telecom. 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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