Telstra Share Price Drops after Challenging Conditions

Recently, Telco let out warnings of lower profits while facing a challenging market.

These conditions caused shares of Telstra [ASX:TLS] to sink by 2.80%, now trading at $2.95.

Telstra’s challenging conditions stems from the government’s practical use of the National Broadband Network (NBN).

The last 12 months have seen some changes in Telstra’s services that challenged its business strategy and customer approach, which mainly comes from its wireless broadband services.

Telstra don’t have much control over the NBN

Despite previously growing in subscriber numbers, Telstra is still impacted by competitive dynamics, as well as the transition of the NBN infrastructure.

Telstra were forced to increase pressures put on fixed and mobile margins in order to properly measure up to its competitor’s rates.

These conditions are set to continue into 2019, dampening hope of future Telstra share price value.

2019 was supposed to be a period where Telstra would receive a lot of profit from the NBN.

Yet, the only impact these recent conditions have had on Telstra, is seen through a loss of customers migrating to NBN on other platforms.

The abundance in competition has resulted in Telstra squeezing its margins.

Their subscribers are increasing but the average revenue they’ve received is falling.

The Sydney Morning Herald reported that Telstra stated:

‘We have bestowed unlimited data to almost half our fixed broadband base and we recently launched an unlimited domestic data plan on mobile.’

Telstra’s long maintained mobile network has always been its main attraction, in 2016 they spent $3 billion dollars to further enhance it.

Despite this, there is little on the horizon that will ensure Telstra’s counter to its competitive channels.

Not earning enough during a downgrade makes things tough for Telstra, but not finding people to invest in their brand during such a time is tough on all fronts.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

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