The share prices of ex-market darlings Telstra Corporation Ltd ( ASX: TLS) and TPG Telecom Ltd (ASX: TPM) could fluctuate wildly next week when TPG Telecom releases its full year results, which is expected to be a nail biting event after UBS downgraded its earnings forecast for TPG Telecom.
Bad news from TPG will be good news for Telstra's shareholders as the former has been a big pain in the posterior of the country's biggest telco.
UBS believes TPG may have lost market share when it lowered its FY18 profit forecast for the group and it is basing its assessment on recent data from the Australian Competition and Consumer Commission (ACCC) and competitors.
The broker estimates that TPG's market share may have slipped 1% in the 12 months to end 2016 and notes that the NBN has focused on its build out in regional Australia, an area that TPG is weak in. This is likely to cause market share loss in the near-term, according to UBS.
The NBN is one reason why the stock is down 55.7% this year as the company has to pay more to access the fibre broadband network compared to Telstra's copper based ADSL network.
The 1% loss may not sound like much of a big deal but it will still add to pressure on the share price of TPG as investors have learned to expect only growth from its elusive chairman and chief executive officer David Teoh.
If UBS' predictions come to pass, it will likely mean no light at the end of the tunnel for TPG's shareholders who have endured a year of pain.
On the other hand, Telstra shareholders might get a small reprieve if the market forms the view that TPG may not be as big a threat as it was originally feared.
The jury is still out, as it is TPG's mobile strategy that poses the biggest threat to Telstra and all investors will be keenly watching to see if Teoh has an update on that front. TPG is expected to release its results on Tuesday, 19 September.
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