The Telstra Corporation Ltd (ASX: TLS) share price is going bananas today.
‘Bananas’ is a technical finance term for ‘it’s rising more than normal’,
Why Are Telstra Shares ‘Rising More Than Normal’?
Telstra shares were trading 4.4% today after a somewhat shock announcement from rival TPG Telecom Ltd (ASX: TPM), which we covered in detail here. TPG announced it would cut plans to grow its mobile business.
As Rask Media contributor, Andrew Schonberger wrote, “Are TPG Telecom Shares A Buy For Mobile Growth”, TPG has been vying for a spot as one of Australia’s largest mobile network operators.
In recent years TPG repeatedly signalled how lucrative the Australian mobile market could be for its business, especially as a complementary business alongside its broadband operation.
Currently, the mobile market is dominated by Telstra, SingTel’s Optus and Vodafone Australia, which is part-owned by Hutchison Telecommunications Australia Ltd (ASX: HTA).
TPG has long used Vodafone’s network to provide mobile plans to its customers, but last year it announced its plans to go head-to-head with Telstra and Optus by rolling out its own 5G mobile network. This spooked everyone because TPG has a habit of competing on price and undercutting rivals.
For example, when TPG announced its plans it offered unlimited mobile data plans for free for the first six months, then $9.99 per month ongoing!
In response to TPG’s lurking, Telstra, the leader of mobile, ‘simplified’ (aka lowered the price of) its mobile packages and emphasised how much more reliable its network would be.
As Rask Media founder Owen Rask wrote here, “60% of Analysts Say Buy Telstra Shares – I’m Not“, mobiles account for 39% of Telstra’s revenue. Amidst a challenging broadband market, the update that TPG will be leaving the mobile market is news to the ears of Telstra shareholders.
However, let’s not get too far ahead of ourselves because TPG is planning to merge with Vodafone – if the ACCC lets it happen!
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