The AMP Limited (ASX: AMP) share price is up 5.37% on Friday following an article published by The Australian last night. The article suggests that AMP, which has recently been flagged as a potential takeover target for Macquarie Group Ltd (ASX: MQG) and other financial services giants, is being watched by private equity. This comes as the AMP share price has seen dismal performance over the last few years.

What will a private equity takeover mean for AMP shareholders?

If a private equity takeover goes ahead, it will most likely mean that AMP shareholders will receive a cash payment for their shares. This would usually come at a premium to the market price, which currently sits at $1.87. Given that there is currently more than one suitor, this could suggest that potential buyers may need to bid higher in order to gain approval from AMP shareholders.

Currently, AMP appears to be preparing a defence. It has used an exemption to the Corporations Act 2001 to buy up AMP shares through a subsidiary. Previously, it had been disposing shares. If a takeover offer is mounted, this subsidiary’s voting power could reduce the likelihood of success. 

How has AMP performed lately?

In March, AMP withdrew its guidance for the 2020 financial year. However, it did announce that its liquidity and capital position remained strong. In 2019, AMP experienced a net loss of $2.5 billion as it wrote down the value of  assets and some of its investments. Underlying profit in 2019 was $464 million. 

AMP is soon to sell its life insurance business. As reported at the company’s annual general meeting last month, the proceeds from this will be used to fund the company’s strategy with surplus funds potentially being distributed to shareholders if conditions are favourable. Currently, AMP appears to be focused on its current strategy of creating a leaner business while improving its wealth management and AMP Capital businesses.

About the AMP share price

The AMP share price has recovered 73% from its 52 week low of $1.08, however, year to date it is still down by around 3%. AMP shares are down 10% since this time in 2019, reflecting the tough economic conditions as a result of the coronavirus pandemic. Longer-term, its share price has dropped 70% since 2015.

However, as takeover speculation mounts there is likely to be upward pressure on the share price. If media reports are correct, AMP is becoming the latest takeover target for 2020. 

More reading

• Why AMP, IOOF, Redbubble, & Westpac shares are charging higher
• Why AMP, Qantas, Qube, & Transurban shares are dropping lower
• ASX 200 finishes higher, Woolworths gives update
• Why the AMP share price is up 9% today
• Why AMP, FlexiGroup, Harvey Norman, & Qube shares are charging higher

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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The Kogan.com Ltd (ASX: KGN) share price is having a rare off day on Friday and is trading lower this afternoon.

At the time of writing the ecommerce company’s shares are down 3% to $14.51.

Why is the Kogan share price tumbling lower?

With no news out of Kogan or any relevant broker notes that I’m aware of, I suspect that today’s decline is likely to be down to profit taking.

After all, there have been very few shares performing as strongly on the ASX this year as Kogan.

Prior to today, the Kogan share price was up a whopping 100% since the start of the year and 334% from its March low.

Why is the Kogan share price on fire in 2020?

Investors have been scrambling to buy the company’s shares after the pandemic accelerated the shift to online shopping and put a rocket up its sales and profit growth.

During the third quarter Kogan reported a 30% lift in sales and a 23% lift in gross profit. This was driven largely by a 50% jump in sales and gross profit in March following the closure of retail stores nationally.

While this was strong, it soon turned out that Kogan’s growth was just warming up.

Its strong form continued into April, with the company growing its sales by more than 100% and its gross profit by more than 150%. The latter was despite the company investing heavily in building its brand and growing its active customers.

Those investments definitely paid off. Kogan grew its active customers by 139,000 during April to 1,948,000 customers.

But it doesn’t stop there. Even though retail stores have now opened again, Kogan has continued to deliver rapid sales growth.

At the start of June, quarter to date, the company’s sales were up over 100% and its gross profit was up over 130%. In addition to this, its adjusted EBITDA had increased by more than 200% quarter to date and its customer numbers had climbed by a further 126,000 to 2,074,000.

What else has been happening?

The company has taken advantage of its strong share price performance to undertake a $115 million capital raising.

Kogan decided to raise the funds to provide it with the financial flexibility to act quickly on future value accretive opportunities.

These opportunities are ones that it feels broaden its offering, expand its customer base, or enhance its operating model. Much like its acquisition of replica furniture and homewares retailer Matt Blatt for $4.4 million in May.

Is it too late to invest?

While I think the short term gains are gone now, I believe there is still an opportunity to invest with a long term view.

I think Kogan has the potential to grow materially in the future thanks to the shift to online, its strong market position, and expansion/acquisition opportunities.

Overall, I would class it as one of the best buy and hold options on the ASX today.

More reading

• Why Kogan, Myer, Orocobre, & Qantas shares are dropping lower
• Share price winners and losers of the pandemic
• Why Accent, CSL, Kogan, & Redbubble shares are pushing higher
• 3 high quality ASX shares I would buy if there were another market crash
• Coronavirus second wave potential could drive investment portfolio changes

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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.

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A spike in coronavirus cases in Victoria has triggered fears of a potential ‘second wave’ of infections. As a result, some supermarkets have re-introduced purchase limits on certain items as panic buyers swoop in. The fear has not only been restricted to shoppers, with global financial markets also seeing an increase in volatility.

Here are 2 ASX shares that could help your portfolio ride out a second wave of coronavirus infections.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare is the 3rd largest provide of clinical laboratory services in the world, with pathology and radiology services in Australia and 7 other countries. The coronavirus pandemic saw a drastic fall in pathology testing volumes as a result of reduced referrals from doctors and government-imposed restrictions.  

The Sonic share price has surged more than 48% from its low in late March and could be poised to go higher following a recent announcement from the company. Earlier this week, Sonic released a better than expected trading update with the company now expecting full-year 2020 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in-line with last year.

With fears of a second wave growing, Sonic could see a further recovery in volumes and revenue as the company continues coronavirus testing. Sonic currently plays a crucial front-line role in Australia, the US and Europe by testing thousands of patients each day for COVID-19.  

ResMed Inc (ASX: RMD)

The ResMed share price is currently trading at all-time highs following a surge in demand for the company’s ventilators. In the 3 months to 31 March 31, ResMed tripled its ventilator production, producing more than 52,000 units in order to fulfil an urgent contract from the Australian Government.

ResMed went on to provide around 5500 invasive and non-invasive ventilators to Australia’s national stockpile. In addition, ResMed was one of the 6 companies named to help facilitate the production and supply of ventilators as the US after the country initiated its Defence Production Act.

With fears of a second wave of coronavirus infections emerging, the ResMed share price could see further upside as demand for ventilation treatments and respiratory humidifiers increase.

Should you buy?

In my opinion, Australia has managed the coronavirus pandemic well thanks to its lockdown procedures and effective testing capabilities. However, with restrictions easing, there is a possibility of a second wave of infections. As a result, I think that both Sonic Healthcare and ResMed would be 2 ASX shares that could provide your portfolio with resilience if volatility picks up.

More reading

• Top brokers recommending you buy these ASX shares in this market sell-off
• Top brokers name 3 ASX shares to sell right now
• 5 things to watch on the ASX 200 on Thursday
• Consider these 3 quality ASX healthcare shares to buy now
• ASX 200 down 0.2%: Afterpay hits record high, TPG Telecom merger vote

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. and Sonic Healthcare Limited. 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.

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The Spirit Telecom Ltd (ASX: ST1) share price is finishing the week with a bang after the small-cap ASX telco announced an acquisition.

At the time of writing, Spirit Telecom shares have jumped 12.2% to 23 cents after rallying as much as 17.1% in early morning trade.

Spirit Telecom considers itself a disruptor in the IT&T (information technology and telecommunication) industry. The company has developed its own advanced fixed wireless network, through which it provides Australians with ‘Sky-Speed Internet’.

Along with providing internet access, Spirit offers a full range of managed IT services and cloud-based business solutions. It also offers internet products from ASX-listed telcos TPG Telecom Ltd (ASX: TPM), OptiComm Ltd (ASX: OPC), and Vocus Group Ltd (ASX: VOC).

What’s the deal?

Spirit is acquiring Gold Coast-based Voice Print Data Group (VPD). VPD will become Spirit’s new wholesale business arm, selling a range of cloud, internet and voice services via its Spirit X sales platform.

Consideration for the acquisition has been split into three tranches. Firstly, the gross purchase price is $14 million, comprising a combination of $7 million cash and $5.8 million of Spirit shares. This prices VPD at around 4 times normalised earnings before interest, tax, depreciation and amortisation (EBITDA).

Tranches 2 and 3 relate to future payments when EBITDA performance exceeds targets for FY21 and FY22. All up, the total maximum purchase price is $27.5 million.

Why is Spirit Telecom acquiring VPD?

In an investor presentation released this morning, Spirit summarised the transaction rationale into 4 primary factors.

Firstly, the acquisition expands Spirit’s reach further into the New South Wales and Queensland markets.

Secondly, it provides the company with access to new data-hungry verticals of mining, industrials and aged care.

Thirdly, the transaction increases Spirit’s scale and adds new high-margin product bundles to its arsenal.

And finally, the VPD acquisition adds a wholesale dealer sales channel for Spirit X, the company’s business-to-business digital sales platform. 

What now?

Completion of the acquisition is subject to normal closing conditions and is expected to occur on 1 July 2020.

Following completion, Spirit will have a combined FY21 revenue run rate of between $70 million and $75 million.

Commenting on the acquisition, managing director Sol Lukatsky said:

“This is a game changer for Spirit and through the acquisition of VPD Group, Spirit will build and strengthen its cloud, security, data and managed IT services capabilities whilst providing entry into expanded geographies in QLD and NSW for verticals such as Mining, Industrials and Aged Care.”

More reading

• Spirit Telecom share price charges higher as the ASX telco launches new NBN service

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SPIRIT TC FPO. 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.

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Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Citi, its analysts have retained their buy rating and $21.50 price target on this fresh milk and infant formula company’s shares. The broker believes that a2 Milk performed strongly during the 18 June Mid-Year Shopping Festival in China. It expects this to have helped shift any excess inventory. I agree with Citi on a2 Milk and would be a buyer of its shares. Especially now it appears to be planning to put its sizeable cash balance to work with new product launches or acquisitions.

CSL Limited (ASX: CSL)

Analyst at UBS have retained their buy rating and $335 price target on this biotherapeutics company’s shares following its acquisition of uniQure’s AMT-061 gene therapy. UBS appears supportive of the acquisition. And while it notes that it is likely to cannibalise the sales of its current haemophilia B therapy (Idelvion) in the future, it doesn’t expect it to be used in children. This could mean both therapies have a place in the market. I agree with UBS and feel CSL would be a great long term investment option.

Qantas Airways Limited (ASX: QAN)

A note out of Morgan Stanley reveals that its analysts have retained their overweight rating and lifted the price target on the airline’s shares to $5.30. The broker appears pleased with its decision to raise capital to create an extra financial buffer over the medium term and support its cost cutting plans. And although it doesn’t expect the airline to be profitable again until FY 2022, it still believes it is a buy today. I think Qantas could prove to be a good investment option if domestic tourism markets recovery in 2021.

More reading

• Why Kogan, Myer, Orocobre, & Qantas shares are dropping lower
• ASX 200 rebounds 1.1%: Big four banks charge higher, Qantas sinks after raising $1.4bn
• REA Group share price has charged 60% since the market bottomed
• Here’s everything you need to know about CSL’s latest acquisition
• Share price winners and losers of the pandemic

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of A2 Milk. 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.

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If you’re a beginner investor, someone who has recently decided to begin your journey of wealth creation, congratulations!

Investing is (in my opinion anyway) one of the best things you can do with your time and money. But, investing can also be scary and financially dangerous. If you don’t know what you’re doing, or you try and master complex trading strategies straight out of the gate, it can lead to permanently losing you capital (which, from experience, is very painful).

So here are 2 ASX shares that I think would be great candidates for an investor who’s just starting out. They shouldn’t be where your investing journey ends, though. I think both of these ASX shares are a great foundation to build wealth from for a lifetime.

Coles Group Ltd (ASX: COL)

I’ve picked Cole because I think almost everyone in the country would be familiar with this company, how it works, how it attracts customers and how it makes money. Being able to understand the companies you own is a vital part of investing, and I think Coles is a great place to start learning as a newbie investor. It’s also a relatively ‘safe’ investment, in my view. Coles operates in a very defensive business that (in my view) faces very little prospects of being significantly disrupted or made redundant in the future (we all need to eat, after all).

Coles has also been moving to automate its supply chains and improve its home delivery options as well, which I think will lead to long-term value for shareholders. Coles also pays a robust and fully franked dividend, which on recent prices is worth a trailing 2.51% per annum.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This investment isn’t an individual company, rather an exchange-traded fund (or ETF). ETFs work by holding a basket or collection of different companies all in one place. In Betashares’ case, the basket consists of the largest 100 companies on the United States’ Nasdaq exchange. And that’s why I think it’s a great choice for a beginner investor.

The Nasdaq is a modern rival to the old New York Stock Exchange and houses most of the newer, exciting tech companies. You would probably be familiar with its top 5 holdings, which in order, are: Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) and Facebook, Inc. Common Stock (NASDAQ: FB).

The other well-known companies within this ETF include Netflix Inc (NASDAQ: NFLX), Adobe Inc (NASDAQ: ADBE), Tesla Inc (NASDAQ: TSLA), and Paypal Holdings Inc (NASDAQ: PYPL).

Betashares also pay a healthy trailing dividend of 1.9%. Many Aussie investors don’t ever venture beyond the companies on the ASX for investing. But I think this ETF is a great way to invest in companies that actually dominate our lives. Plus, you can tell your friends you own shares in Tesla, Apple and Facebook, which is pretty cool!

More reading

• Will Facebook stock surge to $300?
• These are the 4 cheapest ETFs on the ASX
• Add some diversity to your portfolio with these quality ETFs
• Where I would spend $2000 on ASX shares right now
• Here are 3 top ASX tech shares to buy with $5,000 today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Facebook, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Microsoft, Netflix, PayPal Holdings, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Facebook, Netflix, and PayPal Holdings. 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.

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The Council of Financial Regulators (CFR) participated in its quarterly meeting this week. Its subsequent quarterly statement has encouraged banks to “make use of their capital buffers to continue to support businesses and households”, despite an acknowledgement the banks are feeling “the flow-on effects of the stress experienced”. However, CFR also noted that financial institutions have entered this period with a “high level of resilience”.

The council members include four government organisations: the Reserve Bank of Australia (RBA), Australian Prudential Regulation Authority (APRA), Australian Securities & Investments Commission (ASIC) and the Australian Treasury. The Australian Treasurer also attended this meeting.

ASX banks and the importance of capital buffers

The share prices of the big four ASX banks over the past year have been falling. At the time of writing:

• Commonwealth Bank of Australia (ASX:CBA) is down by 16.72%
• National Australia Bank Ltd (ASX:NAB) is down by 31.44%
• Australia and New Zealand Banking Group Ltd (ASX:ANZ) is down by 34.04%
• Westpac Banking Corp (ASX:WBC) is down by 36.43%

The majors all lag the performance of the S&P/ASX200 Index (ASX:XJO), which is down 11.80% at the time of writing. 

During ‘normal’ times, Australian financial institutions increase their capital buffers to help shield them from losses in troubled times. The capital buffers were introduced following the GFC, in which the collapse of large financial institutions such as Lehman Brothers occurred.

APRA determines the big four are “systemically important banks”. In simple terms, this means they are ‘too-big-to-fail’ without very severe economic consequences, which means their capital buffers are crucial.

Our regulators telling the banks to lend is significant – it conveys a level of confidence in the economy being able to bounce back quicker than expected. CFR noted that “the rate of new infections has declined sharply in Australia and restrictions have been eased in many parts of the country earlier than was previously thought.”

Furthermore, the ability to issue credit to households and businesses could help boost spending and ultimately lead to a rebound in economic growth. 

Foolish takeaway

In my view, regulators will do everything in their power to ensure the big four banks will come through the crisis because of the detrimental impact on the financial system should one of them fail. 

Looking long term, I think the ASX banks are on relatively cheap valuations and profitability will eventually come back, leading to improved returns to shareholders. As a result, dividends could return to pre-crisis levels. This will assist passive income investors.

I’m also cautiously optimistic about any economic recovery, because the risk of a second wave remains. This could result in the extension of restrictions and business as usual being delayed for longer. 

More reading

• ASX 200 rebounds 1.1%: Big four banks charge higher, Qantas sinks after raising $1.4bn
• Why AMP, IOOF, Redbubble, & Westpac shares are charging higher
• True economic cost of coronavirus revealed
• These are the 4 cheapest ETFs on the ASX
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Matthew Donald owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a positive note. At the time of writing the benchmark index is up 0.8% to 5,864.9 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Kogan.com Ltd (ASX: KGN) share price has fallen 1.5% to $14.78. This appears to have been driven by profit taking following a very strong rise in 2020. In fact, prior to today, Kogan’s shares were up 100% since the start of the year. Investors have been buying the ecommerce company’s shares after it delivered exceptionally strong sales and profit growth during the pandemic.

The Myer Holdings Ltd (ASX: MYR) share price has fallen almost 7% to 21 cents. Investors appear concerned that the department store operator might struggle to survive the pandemic. Especially after QBE Insurance Group Ltd (ASX: QBE) announced that it will stop providing insurance to suppliers who want to cover the risk of not getting paid by Myer. Australia’s largest provider of trade credit insurance told the ABC that it has severe doubts about Myer’s ability to pay its way.

The Orocobre Limited (ASX: ORE) share price is down 5% to $2.39. This appears to have been driven by a broker note out of Credit Suisse this morning. According to the note, the broker has downgraded the lithium miner’s shares to a neutral rating with a $2.50 price target following its June sales update. Credit Suisse notes that its lithium carbonate pricing has fallen to a record low.

The Qantas Airways Limited (ASX: QAN) share price has fallen 8% to $3.86 after returning from its trading halt. The airline operator’s shares returned to trade this morning after it successfully completed its $1.4 billion placement. Qantas raised the funds through the issue of approximately 372.7 million new shares to institutional investors at a price of $3.65 per new share. This represents a sizeable 12.9% discount to its last close price. It will now seek to raise up to $500 million via a share purchase plan.

More reading

• ASX 200 rebounds 1.1%: Big four banks charge higher, Qantas sinks after raising $1.4bn
• Share price winners and losers of the pandemic
• Qantas share price down 6% after completing $1.4bn institutional placement
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops 2.5%, ASX travel shares dumped

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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.

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Now that the merger between TPG Telecom Ltd (ASX: TPM) and Vodafone is just about guaranteed, attention is turning to what that means for Telstra Corporation Ltd (ASX: TLS).

Our third largest mobile phone operator is bulked up and its new chief executive Iñaki Berroeta appears to be spoiling for a fight to win market share from Telstra.

However, the merger may be what the sector needs and may prove to be a positive for shareholders.

Will a new mobile war erupt?

Just don’t tell Berroeta that. He indicated in an interview with the Australian Financial Review that competition will be heating up as he needs to prove that the $15 billion merger was worth all the trouble.

The ACCC tried unsuccessfully to scuttle the marriage by arguing that competition will lessen with only three players in the field compared to four if TPG remained a separate entity.

The courts took TPG’s and Vodafone’s side, so the newlyweds can’t contradict themselves now.

Biggest winners are investors

But if you taught that customers will be the biggest beneficiaries from the new development, you are probably wrong. Investors may benefit more.

This is because the cut-throat pricing tactics used to take market share will probably take a backseat in the new world order for the sector.

“The last four years in Telco can been characterised as a lot of competitive tussle to achieve no meaningful change in market share and lower profits,” said Morgans.

“With the NBN nearing completion, 5G nearing mainstream launch, and TPG / Vodafone set to merge in July, the market is returning to more rational economics, in our view.”

Same war but different tactics

Other experts have said similar things. The new tactic to win market share is through bundling instead of outright price cuts.

UBS believes that the upside for the new TPG-Vodafone group, which should start trading on the ASX on Monday under the code “TPG”, will be from cross-selling of services.

The broker believes only 23% of Vodafone’s customers use a residential broadband service offered under the TPG umbrella and only 45% of TPG’s fixed broadband customers use mobile phone services that’s on the Vodafone network.

So, while competitive pressure will remain to the benefit of consumers, the change in tactics will not hurt margins in the same way as outright price cuts of the past.

Foolish takeaway

That leaves shareholders as the biggest winners, in my view.

And if you are wondering which stocks represent the best value in the telecoms sector, Morgans reckons its TPG and Superloop Ltd (ASX: SUL).

It’s also worth noting that TPG will spin out its Singapore operations into a newly listed company called Tuas. Existing TPG shareholders will get one share in each of the newly formed entities.

More reading

• These are the 4 cheapest ETFs on the ASX
• Why I think Telstra and these ASX dividend shares are strong buys
• Can 5G help push the Telstra share price higher by 2021?
• Australian businesses are running out of cash
• 3 robust ASX dividend shares you need to own

Brendon Lau owns shares of Telstra Limited and TPG Telecom Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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.

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