Why the Telstra share price is leading the S&P/ ASX200 higher today

The Telstra Corporation Ltd (ASX:TLS) share price is rising on the back of news TPG is abandoning its mobile plans.

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The Telstra Corporation Ltd (ASX: TLS) share price has shot up 7% or 21 cents to $3.21 in afternoon trade to help offset losses across the banking sector and leave the benchmark S&P/ ASX200 (ASX: XJO) 0.6% lower in afternoon trade.

Telstra is rising despite Australia's largest telco not releasing. any market sensitive news since before Christmas 2018. On December 10 it reported it will spend $386 million to secure further 5G spectrum with 5G as it provides "enormous opportunities for growth" according to Telstra's CEO Andy Penn.

The stock is rising today on news that TPG Telecom Ltd (ASX: TPM) and its Machiavellian CEO, David Teoh, have abandoned plans to rollout their own mobile network due to the the government's decision to ban telcos using equipment supplied by Chinese manufacturer Huawei.

TPG Telecom wants to merge with Vodafone Australia, but that desire was knocked back by the ACCC in December partly on the grounds that a merger would stop TPG from becoming an independent fourth player (alongside Optus, Telstra and Vodafone) in the mobile space.

However, this seemed a far-fetched assumption given the eye-watering amounts of capital needed to seriously compete in the 5G space and TPG's lack of progress so far.

In fact according to the Australian newspaper one observer noted the ACCC chief: "Rod Sims is the only person in Australia who thinks there will be four mobile networks".

Investors betting that Mr. Sims may reconsider his original conclusions on the merger have sent Telstra higher today.

However, I suspect over the medium term any TPG Vodafone merger would be bad news for Telstra as it would face a genuine competitor with balance sheet firepower thanks to Vodafone Australia's parent company's largesse.

Either way I'm not a buyer of Telstra shares given its management, debt, track record, and slow-moving nature, while TPG looks no better than a hold given the still considerable risk the ACCC rejects its merger ambitions.

The final roll of the dice for TPG would be challenging the ACCC's rejection in court, this is a route it's likely to pursue if all others fail.

TPG shares have swung from a loss to a 4.6% gain at $7.28 towards the close of trade today.

Motley Fool contributor Tom Richardson owns shares of TPG Telecom Limited. You can find Tom on Twitter @tommyr345 The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended TPG Telecom Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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