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Best telecommunications stocks to watch


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The following five shares could be the best telecoms shares to watch in 2024. These are some of the largest stocks in the sector by market capitalisation.

telecomsSource: Bloomberg
 
Written by: Charles Archer | Financial Writer, London
 

Telecommunications companies design, manufacture, and deliver the technology required to digitally interconnect the world. They offer phone, internet, and television services, and also build and maintain the infrastructure needed to support them.

Telecoms explained

The sector has become increasingly attractive in 2023 to dividend investors, and also to those seeking safer harbours. Telecoms is widely regarded as a defensive sector as customer demand remains stable through recessionary periods — and it is becoming harder to predict whether the long-anticipated global recession will come to pass.

On the other hand, even the largest telecoms companies are still growing and innovating. As part of the tech sector, disruptions including 5G, AI, the Internet of Things, cloud computing, cybersecurity, and blockchains are all growth areas that could see the best telecoms stocks continue to grow.

Indeed, Meucci devised the first phone in 1849, while Bell won the first US patent in 1876. It took until 1991 for Berners-Lee to develop the World Wide Web, and today half of the world carries a smartphone containing the sum of all human knowledge in their pocket, able to contact anybody in the world at a second’s notice.

But the growth isn’t over. The global telecom market rose from $2,642 billion in 2021 to $2,880 billion in 2022, at a CAGR of 9%. And telecoms are forecasted to reach $3,629 billion by 2026 — making the best telecoms stocks perhaps worthy of portfolio consideration.

Best telecoms stocks to watch

The following five shares are some of the largest in the world by market capitalisation.

China Mobile

China Mobile enjoys the largest mobile network in the world when judged by total subscriber numbers — some 991 million customers at the end of 2023. And this figure has been growing for years. It also saw 5G subscribers increase by a net 138 million to 465 million last year, driving 2023’s revenue up by 6.3% year-over-0year to CNY863.5 billion and net profit up 5% year-over-year to CNY131.7 billion.

The company noted that it had ‘accumulatively brought into use more than 1.94 million 5G base stations. We planned for the deployment of the world’s largest RedCap commercial network and built the world’s first 5G new voice network.’ For context, capex stood at CNY180.3 billion for 2023, more than a fifth of total revenue.

It’s worth noting that the Chinese government owns a large majority stake in the company, but it does offer services across 200 countries all over the world. Beyond just voice calls, it supplies broadband, data, cloud computing, and more recently Internet of Things tech.

Market Capitalisation: $195 billion

T-Mobile US

T-Mobile US is one of the largest carriers in the United States, with over 120 million subscribers at the end of April 2024. The company is majority owned by German multinational Deutsche Telekom AG and operates under its own brand as well as MetroPCS and GoSmart.

The telecoms business has a unique reputation in the market as an ‘un-carrier,’ based on a longstanding marketing campaign based on streamlined plans for customers which got rid of contracts, subsidised phones, coverage fees and early termination charges.

In Q1 results, the company saw net income grow by 22% year-over-year to $2.4 billion, which it highlighted as the ‘best in industry growth.’ Service revenues were up by 4% to $16.1 billion, while postpaid services revenue also grew, by 6% to $12.6 billion.

Market Capitalisation: $190 billion

Verizon

Verizon is another one of the so-called ‘big three’ wireless carriers in the United States, with over 143 million subscribers. The company offers significant network coverage, with its 4G LTE network reaching more than 99% of the United States population.

The business also offers fibre optic internet and fixed line services in addition to 5G technology.

In 2023 full-year results, Verizon reported strong cash flow, with wireless service revenue up by 3.2% year-over-year to $76.7 billion, while fixed wireless net additions rose by some 31%, ‘reflecting the increased demand driven by the strength and reliability of the product.’

Further, wireless postpaid net additions jumped by 23%, while consumer postpaid phone gross additions in Q4 alone rose by nearly 17% year-over-year, making the quarter the best performer in four years.

Chairman and CEO Hans Vestberg noted that ‘after delivering continuous improvement throughout 2023, we ended the year strong and continue to pursue the right balance of growth and profitability. 2023 was a year of change. We have the right assets and the best team in place and are well-positioned for growth in 2024.’

Market Capitalisation: $165 billion

Comcast

Comcast is the largest domestic internet service and pay-TV provider in the US, with the majority of its revenue derived from its cable communications sector. The S&P 500 company brings in hundreds of thousands of new internet subscribers every year, which typically sign up on high margin agreements. While there is increasing competition from wireless carriers, Comcast’s overwhelmingly dominant market share means it can continue to invest for the future.

The company also owns NBC Universal, which has a substantial footprint in the US, and Sky, which is hugely influential across Europe. Comcast paid a whopping $39 billion for Sky after a bidding war in 2018, but the businesses are complementary and have helped its long-term performance.

In Q1 results, Chairman and CEO Brian L. Roberts reported that ‘we delivered double-digit growth in Adjusted EPS and free cash flow while returning $3.6 billion to shareholders, investing aggressively in our businesses, and maintaining our strong balance sheet. We grew broadband ARPU over 4%, delivered 7% revenue growth in our connectivity businesses, and expanded our Adjusted EBITDA margin across Connectivity & Platforms.’

Market Capitalisation: $151 billion

AT&T

AT&T is arguably the largest wireless carrier in the US, and is also a dominant force in global telecommunications. Like others on this list, it not only provides mobile phone services, but also landlines, internet access, satellite television and business solutions.

At present, the emphasis appears to be squarely on 5G and fibre optic delivery. The business claims to have the most reliable networks for these advanced services in the United States.

In Q1 results, revenue came in at some $30 billion, while free cash flow was $3.1 billion, up by 2.1 billion year-over-year.

CEO John Stankey enthused that the ‘results this quarter reflect continued strong growth in our Mobility and Consumer Wireline connectivity businesses, which represent about 80% of our total revenues. Customers are choosing AT&T and staying with us. We achieved a record-low first-quarter postpaid phone churn, grew consumer broadband subscribers for the third consecutive quarter, and expanded margins in Mobility and Consumer Wireline.’

Market Capitalisation: $122 billion

 

 
 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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