Why Telstra could be a safer ASX share to buy right now

Here's why Telstra Corporation Ltd (ASX: TLS), could be a safer buy right now with all the current market volatility.

| 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

A number of industries on the ASX have been harshly impacted by the implications of the coronavirus outbreak here in Australia, with sharp share price declines across the board. These industries include travel and tourism as well as hospitality and entertainment. However, one industry that could potentially benefit is the Aussie telecommunications industry.

Increasing demand for broadband and mobile services

I believe that ASX telco providers such as Telstra Corporation Ltd (ASX: TLS), Optus, Vodafone Hutchison Telecommunications (Aus) Ltd (ASX: HTA), TPG Telecom Ltd (ASX: TPM), Vocus Group Ltd (ASX: VOC) and Amaysim Australia Ltd (ASX: AYS) could potentially benefit from an increase in broadband and mobile usage in both the consumer and business segments over the coming months.

For a start, more people will be required to use social distancing procedures as mass gatherings are banned, so communication will be more important.

Additionally, more employees will be working from home which will see a rise in the usage of home broadband, and some schools and universities are already temporarily shutting down. In fact, Telstra has told all of its Australian-based office staff that can do so, to work from home until at least the end of the month.

In particular, there will be high demand for online streaming services such as Netflix Inc (NASDAQ: NFLX), as consumers watch more movies at home rather than in cinemas.

I think Telstra will particularly benefit amongst our telecommunication providers due to its scale and leadership position. Also, its strong cash flow and balance sheet will position it well to face any short-term market challenges.

Telstra's T22 strategy well on track

The ASX telco is now well on track to achieve the goals that it had put in place as part of its T22 strategy, as was revealed in Telstra's first-half results for FY 2020.

The reason the company has implemented this strategy is so it is able to evolve into a leaner, more efficient telco provider in a new era of Australian telecommunications that revolves around the National Broadband Network (NBN).

Before the NBN, Telstra received higher margins from its fixed broadband network, as it was able to offer wholesale services to other providers. However, as the NBN is progressively rolled out, this benefit has been gradually reduced.

Well-positioned to benefit from 5G

Telstra is a world leader in the development of 5G technology. There is a real opportunity for the telco to gain new mobile broadband subscribers from dissatisfied NBN customers when 5G services are eventually launched. 5G has the potential to offer even faster broadband speeds than the NBN, with speeds 7 times the speed of our current 4G network.

Foolish takeaway

With the current high market volatility, I believe that Telstra is worthy of consideration for your ASX buy list due to the relatively strong positioning of the telco market segment in the coronavirus outbreak, along with Telstra's leadership position.

Phil Harpur owns shares of Netflix and Telstra Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Netflix. 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 Technology Shares

A businessman stacks building blocks.
Technology Shares

6% gain! What's up with Block shares today?

Block shares are up more than 34% since 2 May.

Read more »

Happy work colleagues give each other a fist pump.
Technology Shares

Guess which ASX 200 technology stock has outperformed Nvidia over the past 5 years?

This company has been nothing short of impressive.

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Technology Shares

After surging 13% yesterday, are TechnologyOne shares a buy, hold or sell according to Macquarie?

Valuations matter when investing, and Macquarie feels no different.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Technology Shares

Why Goldman Sachs rates this ASX tech share as a top buy

Let's see why the broker rates this stock highly right now.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Technology Shares

WiseTech shares have surged 34% since April. Is it too late to buy?

Can WiseTech shares keep charging higher? Here’s what this investing expert expects.

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Technology Shares

Up 87% in 12 months: Why this ASX tech share is still a top buy

This technology business still has loads of potential, according to a fund manager.

Read more »

a group of three cybersecurity experts stand with satisfied looks on their faces with one holding a laptop computer while he group stands in front of a large bank of computers and electronic equipment.
Technology Shares

2 ASX 200 tech stocks Morgans rates as buys

The leading broker has named a couple of shares to buy right now.

Read more »