On Monday the Telstra Corporation Ltd (ASX: TLS) share price saw its winning streak come to an end with a day in the red.
The telco giant's shares gave back some of their recent gains and finished the day 1% lower at $2.84.
Why did the Telstra share price drop lower?
Telstra's shares came under pressure on Monday after credit ratings agency Standard & Poor's updated its view on the telecommunications company.
As you might have guessed from the share price reaction, it wasn't a positive update. According to the release, Standard and Poor's downgraded both its long-term and short-term rating on Telstra.
The ratings agency downgraded Telstra's long-term rating to A- from A. Whereas the short-term rating was taken down to A-2 from A-1.
Standard & Poor's made the move on the back of concerns over intense competition and weak profitability.
The research note states, courtesy of the ABC, that: "Competition has intensified across Telstra's core businesses and the company has had to accept lower margins as a means of protecting its dominant market share."
Before adding that: "The competitive environment in mobile services intensifies to the extent that Telstra's ability to generate a meaningful premium pricing has substantially eroded."
The ratings agency appears to also have concerns over Telstra's aim to be a world class technology company in the future.
It isn't all doom or gloom, though. Standard & Poor's has kept Telstra on a stable outlook rating and is willing to look at upgrading it if the company were to adopt a more conservative financial policy and is able to "maintain consistent cash flows from its core operations".
Should you buy on this weakness?
While I see a lot of value in Telstra's shares after their recent decline and believe a future dividend cut has now been priced in, it is no longer the low risk investment it used to be.
But I would still choose it ahead of rivals TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC). However, to be safe I would restrict the investment to just a small part of my portfolio.
