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Will 5G Save The Telstra Corporation Ltd (ASX:TLS) Share Price?

Telstra Corporation Ltd (ASX:TLS) has announced this morning that it has invested $386 million in a 5G spectrum auction.

Telstra is Australia’s largest and oldest telecommunictions business, having built the first telegraph line in 1854. Today, it provides more than 17 million retail mobile services, nearly 5 million retail fixed voice services (e.g. home phones) and 3.6 million broadband services.

It also has operations stretching across eHealth, network applications and subsea cabling. Starting in 1997 (until 2006), the Australian Government sold Telstra to Australian investors via the ASX. The second batch of Government share sales, called “T2”, was conducted in 1999 at $7.40 per share.

Telstra’s 5G auction win

Telstra has secured 30-80 MHz nationwide at a cost of $386 million. The purchase of this spectrum will support Telstra’s 5G mobile rollout.

Indeed, this adds to Telstra’s existing 5G spectrum holdings and means it now has 60 MGz of contiguous 5G spectrum in all major capital cities and 50-80 MHz in all regional areas.

Here’s how Telstra describes it:

This will enable us to provide the data, connectivity, low latency and speed necessary to enable new products and services that will radically alter the way we do business, consume content and connect with each other,” Telstra CEO Andrew Penn said.

Who cares about 5G?

Rolling out 5G across Australia is going to be a very important achievement for the telecommunications giant.

Management is hoping that 5G will lead to a jump in average revenue per user. That’s because Telstra is facing intense competition for 4G data bundles from low cost competitors like TPG Telecom Ltd (ASX: TPM), Vocus Group Ltd (ASX: VOC) and Optus.

Telstra boasted that just last week it completed Australia’s first 5G video call and made the world’s first connection of a 5G mid-band commercial device, the HTC 5G Hub mobile smart device.

The telco has already switched on 130 5G-enabled sites around Australia and plan to have 200 sites by the end of 2018. In total, Telstra said it plans to invest $8 billion over the five years to 30 June 2019.

Is Telstra a buy?

The entire telco industry is facing disruption due to the NBN raising the base costs for every broadband provider. Telstra is struggling to grow profit because it can’t really raise prices because it’ll lose customers.

Obviously, the big telcos are hoping to capture more of the value created by 5G compared to 4G. But only time will tell if Telstra can encourage consumers and businesses to pay more for its services and justify the $8 billion investment in 5G.

Therefore, Telstra’s future profit growth is highly uncertain and you may be better off to consider investing in the three ASX shares below…

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