Telstra Group Ltd (ASX: TLS) shares have been having a mixed time of late.
After roaring higher for much of the year, the telco giant’s shares have run out of steam and pulled back in recent weeks.
This means that its shares are down 2% over the last month, compared to a gain of 1.5% by the ASX 200 index.
What’s going on with Telstra shares?
The recent weakness in the Telstra share price could be due to a number of factors.
One is the sudden risk-off sentiment, which has seen investors rush back into higher-risk areas of the market. This has led to defensive stocks like Telstra being left behind somewhat.
In addition, recent news about satellite services could be causing a few concerns for investors.
This week, rival Optus announced a deal with Elon Musk’s Starlink for mobile-to-satellite services. This will allow the telco to increase its coverage from 98.5% of Australia’s population to 100%.
Is satellite internet a threat to Telstra?
Goldman Sachs has been looking at the impact that satellite-to-mobile services could have on Telstra.
And while the broker remains bullish on the telco giant (buy rating $4.80 price target), it does acknowledge that this technology could put pressure on the company’s earnings in the future. Goldman explains:
The proliferation of satellite-to-mobile services in Australia could be disruptive to Telstra’s mobile segment, given it has a significant pricing premium (20-30%) and outsized share of the mobile market (particularly in regional locations). While acknowledging that there are a number of drivers of this value, we believe coverage area is a significant component, given that TLS’s mobile network is significantly larger (99.6% pop, 2.6mn km²) vs. nearest competitor Optus (98.6%, 1.5mn km²).
Hence, the shift towards 100% satellite-to-mobile coverage and the Optus/Starlink agreement will likely be a powerful marketing tool, and possibly reduce Telstra’s coverage advantage in regional Australia – noting to date, Starlink has chosen one MNO partner per market. Consequently, we do see some risk to TLS’s pricing premium / mobile market share over time, while potentially providing Optus (or TPG through other partners) with pricing/share potential. We estimate every 1% decline in TLS ARPU/Regional share is -A$61mn/-A$33mn to FY26E EBITDA.
