Shares of Telstra Corporation Ltd [ASX:TLS] have managed to form a new 52-week high today, by growing 1.16% in today’s day of trading, to hit $3.50 a share.
It’s a notable achievement for the Aussie telco company amidst what Singtel Optus CEO Allen Lew describes as a ‘rife and intense’ time for the mobile market.
Naturally, investing eyes have likely picked up on the positive impact that the ACCC’s decision to block the TPG/Vodafone merger will have on Australia’s largest telco company.
ACCC wants more competition
A media release posted on the ASX by TPG Telecom Ltd [ASX:TPM] stated the ACCC had ‘decided to oppose the merger’ on the basis that it ‘will reduce competition and contestability in this sector…because it would preclude TPG entering as the fourth mobile network operator in Australia.’
The ACCC concluded there is ‘real chance’ TPG will roll out its own mobile network as an additional competitor if the merger doesn’t happen.
‘Prices would fall with TPG’s entry as a new mobile network operator, delivering substantial benefits to consumers.’
TPG and Vodafone are of course looking to appeal the decision, but this will no doubt be a lengthy and time-consuming process.
This is good news for Telstra, says Goldman Sachs, who believe the distraction will take two notable competitors out of the race for 5G. And this means, to detriment of ACCC’s plan, the blocked merger has in fact ‘lower[ed] the risk of a price war’, according to ratings agency Moody’s.
How long can Telstra stay in the lead?
Broker Morgan Stanley saw the TPG/Vodafone merger as ‘a stronger integrated telco, better able to compete with the established number one Telstra and number two, Optus.’
This suggests there isn’t much belief that TPG and Vodafone can hold their own in Australia’s telco market, particularly regarding the upcoming 5G rollout.
Moody’s noted the ACCC block will ‘help (Telstra) cement its first-mover advantage into 5G while the legal proceedings take place.’
Even if the appeal is successful, it won’t be for quite some time until the merger becomes official. It was originally announced in August late last year, and has only just now been given an answer from the ACCC.
Meanwhile, Telstra’s $2 billion asset sale is well in fruition, with the selling of its data centres in the final rounds of bidding. There is knowledge that the sale will be portfolio-based rather than split geographically, which means a cleaner exit for Telstra.
Shares for the telco company are up over 22% for the year, and signs point to this upward trend continuing, at least in the short term. But that rests on no unexpected hurdles, which can never be guaranteed.
For Money Morning
PS: Do you feel as though your smartphone is getting close to outsmarting you? Well, so does the stock market! Check out this free report on ‘The Most Exciting AI and Automation Stocks on the ASX’ to see how our ever-advancing technology could also advance your investment portfolio. Download now.