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TPG/Vodafone Deal Sees Telstra Share Price Jump

Telstra shares have risen by 13 cents, or just over 4 percent, since the proposed $15 billion merger of TPG and Vodafone was announced on August 21.

The most obvious reason cited by analysts is the relative reduction in competition Telstra will face in its prime mobile and Internet markets, with only three major players.

The national carrier has been under continuous pressure in the mobile and Internet markets for years, thanks to the relatively cheap price of wholesale data for its competitors and their highly aggressive pricing. This in turn has led to Telstra having to offer incentives and price its own packages competitively, which has eaten into its own margins.

UBS analyst Eric Choi believes Telstra’s mobile margins will still come under pressure from ongoing aggression by its two remaining serious rivals, Optus and the merged TPG/Vodafone entity.

He predicted that more rational pricing models would return to the market at some point – but that Optus and TPG/Vodafone weren’t showing any immediate signs of curtailing their aggression.