The possibility of Telstra Corporation Ltd (ASX: TLS) cutting dividends has surprisingly done little to deter investors this year, as they have sent the price of the stock up around 17% from $2.85 to ~$3.34.
Rask Media’s founder Owen Raskiewicz has even fallen on his sword over the Telstra stock price movement over the last 12 months. But are there better ideas available on the ASX in 2019?
2 Better Ideas Than Telstra?
With Telstra seemingly offering little besides decreased dividends for the foreseeable future, investors now considering exposure to the Telco industry might also be considering TPG Telecom Ltd (ASX: TPG) shares.
TPG is a smaller company making a move into the mobile market and has more room to grow its profits than Telstra. However, TPG is nervously awaiting a decision from the ACCC and have cancelled their mobile development at this point in time.
Therefore, it’s understandable if investors are nervous about owning TPG shares in 2019. Fortunately, there’s another ASX telco to consider…
Is Vocus An Option?
After Telstra and TPG, ASX investors might consider Vocus Group Ltd (ASX: VOC) shares as a way to get exposure to the Telco sector as they own the retail dodo and iPrimus brands, the second largest national inter-capital fibre network behind Telstra, and a couple of international submarine cables including the Australia Singapore Cable (ASC).
Is The NBN Hurting Vocus?
Vocus has flat out said that the NBN rollout is “complex and economically unattractive” …
They’re basically saying that it wants to take its ball and go home, the only problem it has it doesn’t own the ball to take home.
Vocus: Late To The Mobile Party
It also looks like Vocus was late to the mobile party. Vocus is so late the party was finished last year when the 5G mobile spectrum auction concluded with Telstra, TPG and Singtel Optus acquiring lots of spectrum to broadcast their mobile networks across the country.
Vocus said it has plans to move into 5G by becoming a Mobile Virtual Network Operator (MVNO) on the Optus network. In Vocus’ half-year results, management announced $30.9 million in revenue from mobile. Telstra, in contrast, announced $10.1 billion in revenue from mobile products. Clearly, Vocus’ mobile venture is tiny compared to Telstra.
Buy, Hold Or Sell
Vocus has admitted they cannot compete so well on the NBN and competing on 5G mobile is not going to be any easier as there is a price war underway. Further, if TPG gets the green light from the ACCC to merge with Vodafone, the price war will only intensify.
It’s likely the only time I would be interested in owning Vocus shares is if they spin off or exit their retail brands, which have poor margins, and the business goes back to resembling the original Vocus before merging with M2 Group.
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Disclosure: at the time of writing, Andrew does not own shares in any of the companies mentioned.
