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Telstra share price continues to drop as TPG merger decision looms

An approximate date range has now been set for Justice Middleton to hand down a decision on whether the TPG-Vodafone merger will be allowed to go ahead.

chart Source: Bloomberg

The proposed A$15 billion TPG-Vodafone merger may just represent one of the most important legal cases in Australia this year.

After all, if Justice Middleton, the man currently overseeing the case was to overturn the ACCC’s initial decision to block the TPG-Vodafone merger, the consequence would be the creation of a third mobile player in Australia; one that has the potential to compete with the likes of Optus and Telstra.

Indeed, Justice Middleton himself said that the TPG-Vodafone merger would likely have ‘considerable implications for the Australian telecoms industry at all levels.’

With that in mind and probably to the relief of many shareholders across Australia and abroad, is the fact that the court case looks to be drawing to a close.

On this front, Justice Middleton commented that he will attempt to deliver a decision by the end of 2019, though he qualified such a statement by saying that realistically a decision was unlikely to be handed down until before February 2020, reported the AFR.

The comments noted above ultimately align with the picture painted by Morgan Stanley last month, where the investment bank argued that if the TPG-Vodafone merger was approved, Telstra’s mobile subscriber growth could be curtailed and the company’s average revenue per user potentially impacted.

By comparison, a protracted court case or a flat out rejection of the merger would likely prove beneficial to Telstra suggests Morgan Stanley, as it gives the blue-chip telco additional room to build leadership in the 5G arena.

While not a ‘winner takes all’ game by any means, the stakes remain decisively high.

Telstra and TPG share price action

The Telstra (ASX: TLS) share price has fallen more than 10% since its August peak – though its shares still sit a significant 26% higher than they did at the beginning of 2019. Today, the Telstra share price closed just 0.28% lower.

It's uncertain how much of this price action is a result of speculation concerning the possible outcome of the merger court case or other factors, such as Telstra previously updating its FY20 guidance figures.

On the other hand, the TPG (ASX: TPM) share price may have received a slight boost since court proceedings commenced in early September, with its stock rallying around 10% since September 3.

Tellingly though, recent price movements would suggest that such optimism around a potentially clear-cut outcome has moderated somewhat, as uncertainty around the outcome of the merger case grows.

The TPG share price dropped more sharply than Telstra today, falling 2.54%.

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