Telstra's Direct-to-Device Coverage Premium Could Erode if Optus, TPG Secure Favorable Agreements, Jefferies Says

MT Newswires Live07-13

Telstra Group's (ASX:TLS) coverage premium in direct-to-device services could erode over time if Optus and TPG Telecom (ASX:TPG) can secure favorable agreements with satellite operators, according to a Friday note by Jefferies.

Network quality, speed, and reliability remain important differentiators. Capacity, uplink speeds, indoor penetration, spectrum, and handset compatibility remain key constraints for effective direct-to-device satellite services.

The LEO sats direct-to-device services are not expected to pose a material threat to Australian mobile operators, particularly in metro, suburban, and major regional areas where terrestrial networks should remain far superior. Satellites are likely to play a larger role in rural areas.

Telstra's postpaid mobile ARPU growth is forecast to be between 3% to 4% per annum over the next three years.

The investment firm assigned hold ratings to both firms, while cutting Telstra's price target to AU$5.10 from AU$5.40 and lowering TPG Telecom's price target to AU$3.80 from AU$3.90.

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