Telstra Corporation Limited

Market Speculation related to Spectrum 5G: Telstra Corporation Limited’s (ASX: TLS) shares ended flat post edging up slightly on July 13, 2018 with enhanced market speculation related to 5G spectrum where investment would play a key role for high sustainability. Recently, Telstra revealed AFL streaming plan after Optus FIFA fail. Following this, the company has turned on LTE broadcast (LTE-B) technology all through its network, empowering real-time data to be multicast to all users on cell site rather than each user requiring separate stream. The objective of this technology is to minimize the network load popular, bandwidth-intensive real-time video content, yet it can also be used to distribute software updates, and for preloading of video content for later viewing. The company exhibited LTE-B at its launch with more than 100 Samsung Galaxy S8 and Galaxy S9 devices with the high definition content from the Telstra AFL app using LTE-B while a second batch displayed the same content through the single network to another network, with degraded quality because of the load as they set on the network. Further, the management stated that the company will add more devices and applications in the coming months. At present, the company had approximately 1.2 Mn users of its AFL app, and all network users would be benefited because LTE-B usage for the AFL app is free. Moreover, the company will continue to evolve future apps and work with other players as they have recently developed AFL app with the collaboration of Samsung and Expway which supplied software that connects two separate applications. We expect that this approach will provide future benefits to the company.


Company’s 5G Technology Overview (Source: Company Reports)

However, the Company is trying to set a new benchmark of trust with its customers. By 30 June 2019, customers will experience a radically simplified, fully- digital relationship with the Company. It continues to execute its enterprises strategy to drive growth and differentiation. On financial front, RoE stood at 11.8% in 1HFY18 which is largely in-line with the prior corresponding period (PCP). The current ratio and quick ratio were recorded at 0.82x and 0.72x during the same period. Meanwhile, the share price has fallen 25.73 per cent in the past six months and trading close to 52-week low level. Further, Mike Wright, who has been Telstra’s networks head is leaving the company while its 2022 recovery strategy is being implemented. Based on the recent developments and stiff competition in the upcoming 5G spectrum auction and roll out, we maintain our “Hold” recommendation on the stock at the current market price of $ 2.750.
 

TPG Telecom Limited

Long-Term Player: TPG Telecom Limited (ASX: TPM) is becoming a leading force in the Australian telecommunications industry; and through an extensive infrastructure, TPG provides a diverse range of communication services to residential users, small and medium enterprises (SMEs), government and large corporate enterprises. The company posted mixed bag performance in the first half of the year wherein underlying EBITDA stood at $ 418.2 Mn which is largely in line with prior corresponding period. The reported NPAT came at $198.7 Mn with EPS for 1H 2018 of 21.5 cents per share. As of now, the company is moving well towards achieving its FY18 guidance on underlying EBITDA of $825-$830 Mn with Singapore project to attain service coverage in December 2018. The recent NBN changes to its wholesale pricing, effective 2Q CY18 are also expected to benefit telco players including TPM. The group lately launched its new nbn50 plan as part of its recent nbn product revamp. The new nbn50 plan includes unlimited data and is configured on a higher speed tier that has a wholesale nbn access speed of 50Mbps. Moreover, the company has recently launched exciting mobile offer that represents free unlimited mobile data on its Brand-New Australia Mobile Network for the first 6 months, thereafter, it will be charged at the price of $9.99 per month. This offer is expected to be available in Q3-Q4 2018. Hence, we expect that this strategy will help to generate volume growth at the back of captured telco market and customer dependency, thereafter they will focus on maximizing their profitability at the later stage. Meanwhile, the share price tumbled 15.98 per cent in the past six months (as at July 12, 2018) and currently trading at the reasonable price (at 12.84 P/E multiple). With respect to the 5G auction, the group is likely to spend an amount in the range of $300 million. We maintain our “Buy” recommendation on the stock at the current price of $ 5.460, considering positive outlook backed by strong fundamentals and market penetration strategy.


1HFY18 Financial Highlights (Source: Company Reports)
 

Amaysim Australia Limited

Responded to ACCC proceedings: Amaysim Australia Limited (ASX: AYS) has responded to Australian Competition and Consumer Commission (ACCC) proceedings against its subsidiary, Amaysim Energy, in relation to statements about discounts and savings of its energy products that it considers having contravened conduct provisions of the Australian Consumer Law. Further, the group takes its obligations under the Australian Consumer Law and has appropriate processes in place to ensure compliance. However, the Company rejects the claims being made by the ACCC and believes that it has acted lawfully, ethically and in accordance with industry practice. The ACCC's allegations relate to legacy Click Energy products which are no longer offered to the public. With this announcement, the share price has fallen around 12.5% in the last five days. Besides this, the share plunged almost 54.50 per cent in the past six months as at July 12, 2018 due to rising competition and mobile price war in the Australia market. As of now, we maintain our “Hold” recommendation on the stock at the current market price of $ 0.885 as it trades at the lower level and the business might revive at the back of robust brand in domestic market and well-diversified product portfolio mix. However, the impact from 5G network on AYS customers is to be watched out for.

 
Future Vision (Source: Company Reports)

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