What’s going on with the Telstra share price?

TELSTRA

What’s happened to Telstra Shares?

It’s been a topsy turvy ride for shareholders in Australia’s largest telco, Telstra [ASX:TLS] over the last 12 months.

In July last year, its share price looked like it was on the way up to $6. Fast forward to April this year, and its share price briefly traded at $4.

Why have Telstra shares fallen?

In August 2016, Telstra disappointed investors when it chose not to share the spoils from the $2 billion sale of its Chinese car ad site, Autohome. Instead, it invested the funds in its network and initiated a share buyback, rather than give shareholders a special dividend.

And its interim results earlier this year missed the mark, putting further pressure on its share price.

But what really accelerated the decline was an unexpected announcement from TPG Telecom [ASX:TPG]. In April, TPG unveiled plans to set up a fourth mobile network in Australia. Given that Telstra has around half the mobile phone market and the highest margins, the market believed it had the most to lose.

What now Telstra?

Luckily for shareholders, the ACCC recently announced that it was not going to change the mobile roaming rules. If it had done so, it would have forced Telstra to allow its competitors access to its mobile phone towers — something that would have further reduced its dominance in the market.

Of course, TPG is still a long way from getting its network up and running — something it estimates will take three years. And some are sceptical whether it has allocated enough funds. But even if it takes a small slice of the market, it does so at the expense of Telstra and two other incumbents — Optus and Vodafone.

By Matt Hibbard

Money Morning 

Matt Hibbard

Matt Hibbard

Editor at Total Income

With nearly three decades in the markets, Matt has traded just about every asset class there is. The one thing that has stuck with him over this time is a very simple premise. That is, it’s the cash a company generates that ultimately determines its value.

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