Telstra share price rises as Optus folds to inflation

The Telstra Corporation Ltd (ASX: TLS) share price is on form on Wednesday.

In afternoon trade, the telco giant’s shares are up 1.5% to $3.95.

Why is the Telstra share price rising?

The catalyst for the rise in the Telstra share price today appears to be news that Optus is lifting the prices of its legacy mobile plans.

Optus has informed customers on its legacy $39/$49/$59 plans that pricing will increase $4 per month from 8 August to $43/$53/$63, respectively. The telco explained that the higher pricing was justified because of ongoing network investment and cost inflation.

Why is this good news?

Goldman Sachs highlights that this is good news for Telstra, which also announced price increases recently, because it “is another positive sign supporting a rational mobile market.”

And while Optus has yet to increase its in-market pricing, the broker expects this to happen before the end of the year.

Furthermore, although TPG Telecom Ltd (ASX: TPG) has not followed suit yet, Goldman isn’t overly surprised. This is because the ACCC is currently looking at its proposed Multi-Operator Core Network (MOCN) deal with Telstra.

Goldman explained:

We expect TPG will wait until early 2023 before making a decision. At this point its proposed MOCN deal with Telstra will have been implemented if successful (ACCC ruling due by 17th October), and the company will face the choice of targeting ARPU growth or market share. Commentary at its recent Investor Day was non-committal on this, which we see as unsurprising given the ongoing ACCC review.

Are Telstra’s shares a buy?

Goldman Sachs currently has a neutral rating on Telstra’s shares. However, with a price target of $4.30, this still implies potential upside of 9% for investors.

And if you include dividends, the potential total return stretches to approximately 13% over the next 12 months.

The post Telstra share price rises as Optus folds to inflation appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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