Telstra's share price declines will extend over the next 60 days, according to analysts at Morgan Stanley.
Analysts led by Andrew McLeod formed this view after rival TPG Telecom on Wednesday kicked off an equity raising to help pay $1.26 billion for an 11-year licence to use 2x10 megahertz of 700 MHz mobile spectrum
"As a result of this development we see a wider risk profile surrounding Telstra's future earnings and valuation as a result of likely increased mobiles competition," they said in a note to clients.
"We estimate that there is about an 80 per cent-plus (or "highly likely") probability for the (share price decline) scenario."
Morgan Stanley has an "underweight" rating on Telstra and a price target of $4.50.
The analysts noted downside risks for Telstra's earnings prospects included that the company's fixed-line decline accelerated and reduced fixed-line profitability and that Australia's cash rate increased during fiscal 2017 more than its forecasts.
That would lessen "the dividend yield attraction" of Telstra.
On the upside, Morgan Stanley said there was the potential for Telstra to slow the fixed-line decline and reduce churn or continue to increase market share in mobile above the broker's expectations.
