Telstra Group Ltd (ASX: TLS) shares are an interesting investment consideration in the current economic climate.
The ASX telco share is by far the leader in Australia's telco space, with the widest network coverage, the most subscribers, and the most useful spectrum assets to deliver a strong service to customers.
Warren Buffett's track record at Berkshire Hathaway is impressive, as he has chosen a number of stocks that have generated excellent long-term returns. Let's consider whether he'd like Telstra shares.
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Is the ASX telco share an appealing buy?
The Omaha investor has previously said that one of his favourite types of investments is a monopoly because of the economic moat and having no serious competitors.
Telstra does have some competition in Australia, such as Optus, TPG Telecom Ltd (ASX: TPG), Superloop Ltd (ASX: SLC), Aussie Broadband Ltd (ASX: ABB), Aldi Mobile, and more.
But, I'd say Telstra has a stronger market position than leaders in industries like banking or mining.
That market position has given Telstra the confidence to regularly increase prices for subscribers. While that may slow growth, it maximises revenue and helps increase margins.
Telstra also provides the network for a number of smaller challengers that focus on value, so if those telcos gain subscribers, Telstra can win here too.
Would Warren Buffett buy Telstra shares?
Broker UBS thinks the company's net profit and dividend can increase each year between FY26 and FY30, which is a strong tailwind for shareholder returns in the coming years.
UBS wrote in a note earlier this month:
We have a Neutral [rating] on TLS. TLS is trading on 8x FY26e EBITDA, offering 4% dividend yield which we view justified for 8% DPS [dividend per share] CAGR over next 3yrs, with upside should we see greater price rises and Intercity Fibre revenue coming online faster than anticipated.
Based on the projection on CMC Markets, Telstra shares are valued at 24x FY26's estimated earnings. That may not be the lowest price-to-earnings (P/E) ratio the business has traded at over the last few years, but it could be reasonable given the ongoing earnings growth in the coming years.
But Warren Buffett hasn't shown much interest in materially investing in telecommunications businesses during his stellar investing years.
So, while Telstra shares are an attractive investment in my view, it's probably not going to be one that delivers an average total shareholder return of 20% per year over the next decade or two from where it is today.
