The Telstra Corporation Ltd (ASX: TLS) share price has been one of the worst performers on the ASX 200 on Thursday.
In morning trade the telco giant's shares fell as much as 5.5% to $2.86.
Why is the Telstra share price sinking lower today?
The Telstra share price has taken a hit today after the ACCC cast a doubt on the merger between TPG Telecom Ltd (ASX: TPM) and Vodafone Australia.
This merger was expected to result in a reduction in competition in the telco market and a recovery in margins.
However, the ACCC has recognised this and expressed concerns that "removing TPG as a new independent competitor with its own network, in what is a concentrated market for mobile services, would be likely to result in a substantial lessening of competition."
This is because it believes that if "TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances."
One glimmer of hope for Telstra shareholders is that TPG Telecom has acknowledged the ACCC's statement of issues, but "remains confident that the necessary regulatory approvals and other conditions precedent can be completed to enable completion of the merger in the first half of 2019."
The ACCC has invited submissions from interested parties on the Statement of Issues by January 18 2019, after which it expects to make a final decision on the merger by March 28 2019.
Should you buy the dip?
If the merger doesn't go ahead and competition intensifies in the telco market, then I expect Telstra to struggle to improve its margins over the coming years. This could put pressure on its earnings and ultimately its dividend.
In light of this, I would suggest investors stay clear of Telstra, TPG Telecom, Vocus Group Ltd (ASX: VOC), and the rest of the sector until the ACCC makes its decision in March.
