How Coles, Optus and the NBN just hurt Telstra's earnings

Coles Group Limited (ASX:COL), Optus and the NBN just teamed up to hurt Telstra Corporation Ltd (ASX:TLS).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Coles Group Limited (ASX: COL), Optus and NBN Co just teamed up to deliver an earnings hit to Telstra Corporation Ltd (ASX: TLS).

According to AFR reporting, NBN Co is going to work with Optus to build a fibre broadband network for Coles that will see Optus replace Telstra as Coles' internet provider.

You can guess that Coles isn't spending just $100 a month on its broadband requirements, this deal is likely to be a significant hit to Telstra's earnings considering the size of Coles.

NBN Co will be responsible for doing the initial legwork to lay fibre optic cables to every Coles supermarket, liquor location and convenience store in Australia. It is going to be a large deal.

The AFR speculated that this deal could be worth around $100 million. As part of the deal, Optus will become part of Flybuys and Optus products and services will be sold in Coles stores.

Once the multi-year deal with Optus expires, Coles will still be using NBN-owned cables but it will have the option to move away from Optus.

Coles chief information and digital officer Roger Sniezek was quoted by the AFR as saying "The increased speeds and capacity of this new network give us the flexibility to rapidly increase the speed at which our stores can access and transfer data. We are delighted to be partnering with Optus to leverage the speed, flexibility and agility of the new network, implement new digital initiatives, and ensure we are well-placed to take advantage of emerging technologies in coming years."

You can imagine Coles will use this network to also provide a better (and more alluring) shopping experience to customers once it is installed.

Foolish takeaway

Whilst it's interesting to see what Coles is doing, this is another disappointment for Telstra that seems to be losing the competitive advantage that it used to have. I wouldn't want to be a Telstra shareholder for at least a year or two until the economics of 5G becomes clear.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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.

More on Share Market News

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »