TPG Telecom's rollout of its own high-speed mobile phone network is expected to only have a "modest" impact on market heavyweight Telstra, analysts say.
Broadband internet player TPG announced in April that it would spend around $1.9 billion building Australia's fourth mobile network, with the rollout to begin in 2018.
However, Telstra mobile customers are about half as likely to switch to a new TPG network as customers of smaller rival telcos Optus and Vodafone, a survey of consumers by UBS analysts has found.
Telstra's capital city customers were "surprisingly reluctant" to switch to a $25 unlimited mobile package that UBS believes TPG will offer, the survey of 1,800 mobile users found.
Respondents cited limited geographic coverage as the main deterrent, followed by a potentially lengthy TPG network rollout.
The biggest threat to Telstra is the price competition TPG's arrival will trigger from Vodafone and Optus, the UBS team, led by telco and media analyst Eric Choi, said.
"We see only moderate share impacts from TPG to Telstra upon entering the market," the report said.
"However, price responses ahead of TPG's entry do concern us."
The report also noted that Telstra had a strong balance sheet and could easily compete on price.
UBS analysts also expressed concern about future costs that TPG may face during its mobile network rollout.
The telco plans to spend $600 million on rolling out a mobile network over three years, an initial outlay UBS described as "realistic."
But ongoing capital expenditure is uncertain, with future maintenance costs expected to be in the range of $150 million to $180 million, UBS said.
As a result, UBS has cut their recommendation from buy to a neutral status for TPG and lowered their 12-month share price expectation from $6.70 to $6.00.
Shares in TPG fell 1.6 per cent to $5.70 and Telstra also closed 1.6 per cent lower at $4.30 on Friday, amid a widespread market sell-off on the final day of the financial year.
