What Made TPG Telecom Limited To Move Up On ASX?

Telecommunications group, TPG Telecom Ltd (ASX: TPM) showed an upside movement of  1.31%  touching  the levels $7.74, recording a significant percentage move in the S&P/ASX 200 on October 22, 2018. The group is now gaining traction among the market experts, with some punting on the stock for accumulation. Peer group, Vocus Communications also showed an upside move of about 2.89% touching close to the 1 year high at $3.55. Rise in price levels came in with volumes reflecting enhanced average daily volume. 

Telecommunications group, TPG came up with its annual report for the FY18, in the month of September and ever since the stock is trading at lower band. However, in the month of October after touching the lows of $7.42, the scrip showed some recovery from the lower levels. However, the closing was above $7.5 and the pull back from these levels and with scrip already in oversold zone as indicated by RSI on the charts reflects for buying interest to come up within next trading sessions. Levels of $7.50 play a strong support zone for the scrip. Potential upside resistance can be around $8.5. On fundamental side, the corporate revenue showed overall growth of 2.05% in FY-18 as compared to FY17, with major revenue contributed from data/internet services. Data and internet services reported the growth of around 7.85 in FY18 as compared to FY17.

With the announcement of merger deal of around $15bn between TPG telecom and Vodafone Australia, serious competition will be posed to its peers Telstra and Optus. TPG being the second largest internet service provider in Australia having  more than 1.9 million subscribers, while Vodafone being the third largest mobile operator having 6 million subscribers, look to be complementary to each other. TPG and Vodafone together will have a comprehensive portfolio compromising of fixed and mobile products, and will have the infrastructure required to provide faster services competitive value propositions to customers. The merger will raise up Vodafone’s 156 MHz of mobile spectrum with TPG’s  40 MHz slice, which will help in bringing it close to Telstra’s 217 MHz. The merger deal will bring together more than 27,000km of metropolitan and inter-capital fibre networks, along with a mobile network with over 5,000 sites.

The synergies of two established giants is expected to form an organization with the efficient scale of operations, effective financial strength in future. Subject to approval from regulators including the foreign investment review board and competition watchdog the merger deal  is expected to be completed next year. TPG and Vodafone Australia have also a signed a joint venture agreement for the acquisition of 5G spectrum at a federal government auction which is due in November, 2018. The stock is expected to show a good recovery from the major support levels and to continue the upside move on account of merger which is expected to be completed by next year. Enhanced product portfolio, huge subscriber base, mobile spectrum and effective reduction in cost will together help in moving the price towards upside band. Current price levels indicate a good bounce as expected in near term.

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