After all the excitement over the past week about the latest telco news, Telstra Group Ltd (ASX: TLS) shares are back to where they were a week ago. The share price also hasnāt moved much compared to a month ago either, as we can see on the chart below.
Readers may have seen the news that TPG Telecom Ltd (ASX: TPG) has been blocked again from its agreement to use Telstraās regional network. This decision was made by the Australian Competition Tribunal following the Australian Competition and Consumer Commission (ACCC) ruling against the proposal.
The key reason given was the a risk āTPG and Optus will invest less in critical infrastructure”.
What does this mean for Telstra shares?
Basically, this means Telstra won’t get access to TPGās spectrum and its network wonāt earn quite as much, which is unfortunate for the large telco.
But, it also means that Telstra seemingly wonāt have as much competition for customers living in, or going to, regional areas.
The Australian Competition Tribunal noted that the ACCC said Telstra has āthe largest spectrum holdings, the most extensive network coverage, the highest retail prices, and the greatest market share, demonstrating that it has a degree of market power”.
That sounds like a good bull case to me!
Telstra has demonstrated its ability to raise its prices to customers amid the inflation weāre seeing, which is boosting its revenue and profit. Due to its strong network advantages, Telstra is still gaining customers.
Is it a buy?
Iād guess that most households and businesses will keep paying for their telecommunications bill over most other costs. Indeed, these days an internet connection is an essential service.
The ASX telco share is not exactly valued cheaply for its projected profit. Commsec numbers suggest that Telstra shares are valued at 23 times FY24ās estimated earnings and under 21 times FY25ās estimated earnings.
Earnings are expected to steadily rise in the next two years, which is a good sign and could help push the Telstra share price higher.
I also like Telstra’s moves to diversify its operations and earnings sources through Digicel Pacific and Telstra Health.
As a defensive ASX dividend share idea, I think it could be one of the leading blue chips. In FY24, Telstra could pay a grossed-up dividend yield of 5.9%.
The company is doing well at growing its core business, and itās steadily investing in its 5G network. Iām curious to see if 5G unlocks more earnings streams for the business. Certainly, that would be a useful boost if more fee-paying devices are connected to the Telstra network.
Iād rate it as a buy thanks to its defensive qualities, growing earnings, and solid dividends.