The share price of Telstra Corporation Ltd (ASX: TLS) is taking a battering amid the broader market carnage but there could be a new reason for investors to dump the stock.
Telstra is down 1.5% to $3.50 in morning trade with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) falling by a similar amount although the latest trading updates from Optus and Amaysim Australia Ltd (ASX: AYS) could indicate eroding market share for Telstra's all-important mobile business, which is seen as its growth engine.
Optus' post-paid subscribers increased by 127,000 in the December quarter, according to a report by UBS. This marks the highest rate of post-paid handset growth in the company's history.
Meanwhile, Amaysim reported a 10% increase in mobile subscribers to 1.127 million in its first half trading update.
It is hard to say for sure if Telstra is losing market share as the company has not provided any details on its mobile business but UBS strongly suspects Optus' growth is coming at the expense of Telstra as Optus' network and content investments are paying off.
"We see downside risk to both consensus TLS 1H18 post-paid ARPU [average revenue per user] growth (from loss of business mobile share / pressure to excess data pools) and post-paid sub growth (given the strength of Optus net adds) expectations, which seem to factor little deceleration vs. 2H17," said the broker.
"However, we also expect mobile leasing plans (which decrease upfront handset costs, but incur additional monthly lease expenses) to blunt the 1H18 EBITDA / margin impact."
But falling ARPU isn't only going to impact on Telstra as it is also likely to be pressuring the wider mobile industry. Amaysim may have reported an increase in mobile subscriber growth but it also said that mobile net revenue fell 7% due to a reduction in mobile ARPU.
This is bad news for Vocus Group Ltd (ASX: VOC) and TPG Telecom Ltd (ASX: TPM) with the latter close to launching its own mobile network.
Mobile subscribers are enjoying a big lift in mobile data limits on their plans and there are an increasing number of $10 plans with unlimited talk and text.
Telstra is banking on 5G (the next generation of mobile internet) to help alleviate some of the pressure but I am not sure if 5G in itself will be enough to return the stock to growth. Rising interest rates is also set to become a bigger headwind for the telco sector over the medium term as it makes their dividend yield less attractive.
UBS has a "neutral" rating on Telstra with a price target of $3.60 per share.
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