Telstra Group Ltd (ASX: TLS) $5.10

Telstra’s biggest risk in the short-term is that rivals like Optus use Starlink satellite coverage to close the network coverage gap that currently “justifies” Telstra charging a 20–30% premium, but the technology, spectrum constraints and timeline suggest this is a 2028 and onwards problem, not a 2026 one. But, as we’ve mentioned earlier, technological advancements are unfolding at lightning speed, and shouldn’t be underestimated. Also, with the Australian consumer under pressure and AI making comparisons and movement easier, Telstra may have to work harder to maintain its dominant market position; perhaps it might even consider adding some customer service into the mix!

To put the numbers into perspective, Telstra covers 99.7% of Australia versus Optus at 98.5% and Vodafone at 98.4%, the advantage sounds small, but it’s the difference between having service and not having service for millions of Australians in regional and remote areas, and it’s exactly why the SpaceX threat to that premium matters so much to the TLS investment thesis.

However, while the technology side of things is fascinating with SpaceX now in the mix, there are a couple of basic issues that are worth flagging with Telstra here and now:

• As the US-Iran conflict winds down, the defensive bid that has supported stocks like the consumer staples and telcos is likely to fade.
• Telstra is trading on the expensive side, around 5% above its average valuation.

Telstra has been much cheaper over recent years, and we simply don’t believe this is the right time to be paying a premium for Australia’s dominant telco.

We feel that after witnessing the pain across the local software stocks, investors won’t want to bet against SpaceX, after all, most people tried to buy it in the float. In the coming months, a test of $4.70 wouldn’t surprise us, ~8% lower, but the risk/reward is unattractive despite its ~4% fully franked yield.

• We see no reason to buy TLS in the face of the uncertainty being created by SpaceX.