The Telstra Corporation Ltd (ASX: TLS) share price is now officially in a bear market, having fallen 22% in the past 3 months:
The reasons behind the sell-off are many, and include increased competition from TPG Telecom Ltd (ASX: TPM), which recently announced a capital raising to support an expansion into mobile services. The broadband space continues to heat up, as customers migrate to the national broadband network. Investors are also worried that Telstra may no longer be able to sustain its current dividend, which has become something of a legend in the market due to its reliability over the past decade or more.
Ultimately it's not just Telstra being sold off either, with TPG shares plunging today, and Vocus Group Ltd (ASX: VOC) has taken a beating – down 30% in the past 3 months, and 60% in the past year. Short sellers are also betting heavily against Vocus, but not against TPG or Telstra.
Is it time to abandon telecom stocks?
The opposite, in my opinion. Today's prices are sufficiently low enough that investors with the patience to hold for the long term could do quite well out of the sector over the long term. Telstra shareholders could likely beat the market with its dividend alone – even if it gets cut.
Rather than considering whether to sell your telecom shares, I think investors could spend their time more profitably by evaluating which company might have a competitive advantage that could see them recognised as one of the winners in 5-10 years' time.
