Telstra (ASX:TLS) and TPG Telecom (ASX:TPG) are expected to have another "constructive year" in 2026, supported by disciplined pricing and tighter cost control, which should lift returns on invested capital and release more cash for shareholder distributions, according to a Tuesday Australian Financial Review report, citing UBS Analyst Lucy Huang.

Huang noted that mobile price increases and leaner cost structures remain the key drivers, while a two-year "spectrum holiday" and a slowdown in 5G rollout spending are expected to reduce industry capital expenditure.

UBS expects Telstra to raise postpaid prices by about 4.5% in July, and TPG Telecom to lift prices by roughly 3% while noting that TPG faces a higher risk of customer churn, and both operators are expected to lose about 1% of the postpaid market share to mobile virtual network operators, the report added.

UBS reaffirmed neutral ratings on TLS and TPG while raising the target price of TLS to AU$4.90 and lowering TPG's price target to AU$3.80.

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