Telstra Group Ltd (ASX: TLS) shares have underperformed major benchmarks in 2024 and are down roughly 1% this year.
Now, the telco giant could be up for a fresh set of challenges, and the push might not even come from rival telcos but from outer space.
Rocket manufacturing company SpaceX, which owns satellite internet company Starlink, is set to deliver "direct-to-mobile" satellite services here in Australia.
If successful, we could be on the doorstep of a major shift in how the sector operates. But what does this mean for Telstra shares?
Starlink's 'direct-to-cell' technology
Telstra shares are sensitive to factors that might impact its market share in Australia. According to Statista, as of 2023, the telco held 43% of the Australian mobile phone services retail market.
Telstra's coverage is extensive, but if you're anything like the rest of us and have driven more than five minutes from a major city, you'll know there are certain dead zones.
Starlink's direct-to-cell (DTC) technology aims to solve this. By the way, there are a few new-age acronyms here, so stick with me.
It aims to eliminate these zones by using SpaceX's Low Earth Orbit (LEO) satellites. These will essentially connect to and provide coverage directly to eligible mobile devices. According to Starlink:
In addition to expanding mobile coverage, Direct to Cell will enable ubiquitous Internet of Things (IoT) connectivity outside of terrestrial coverage, connecting millions of devices across critical global industries.
Critically, users won't need any new hardware to use the service. Just to connect to the network of LEO's via Starlink's offering. What an age to be alive.
Telstra's rival Optus has announced plans to integrate this technology into its operations.
Like a bland steak lacking salt, Optus is extremely light on the details but notes that initial usage will cover text messages before expanding to voice calls and data.
All said and done, objectively speaking, this could dramatically improve coverage in Australia. According to Optus, only one-third of the landmass has mobile connectivity.
Telstra, the ever-ready 44 billion pound (dollar) gorilla it is, hasn't been standing idle and tossing around banana peels.
In a play fit for the king's court, it has already rolled out its Telstra Satellite Voice, which is also powered by Starlink's service.
It too is providing unlimited calls across Australia via Starlink's satellite network, all for the perfectly round figure of $50 per month.
While not yet the full "direct-to-mobile" experience, one can't deny it is preparing for competition in "the satellite space". Will Telstra shares trade higher on "satellite earnings" one day? Who knows? If SpaceX lists, it will trade higher or lower on "rocket earnings".
How could this affect Telstra shares?
Telstra's dominance in the Australian telecommunications market is as broad and vast as the gates of Mordor.
It includes extensive base infrastructure and bandwidth, both of which are savagely fought over in the junkyard of data and communications.
But if Optus and SpaceX succeed in launching this new model, Telstra will have to act sharp. In my opinion, competition could be seen in more remote and regional markets, where this kind of satellite connectivity offers an edge.
Let the "telco wars" begin.
Telstra shares takeout
The rise of satellite-based mobile connectivity could be a disruptive force if it succeeds. However, it is still very early days.
Even still, it's important to remain focused on the long term, as Telstra has some advantages for investment portfolios.
In the last 12 months, the stock is up 3%.
