Companies in Telecommunications industry provide the means of communication – internet, telephone, TV, etc. – to individuals and businesses using fixed-line, cellular, wireless, broadband or fiber optic cable networks.
According to Investopedia, Communications industry consists of three sectors:
- Telecom equipment – the largest sector;
- Telecom services;
- Wireless communications – the fastest growing sector.
The future of Telecommunication industry belongs to the wireless communications sector as mobile devices and cloud-based technologies are increasingly used for communications. Internet based and mobile phone systems are replacing fixed-line ones. Wireless digital technology becomes the main form of communication.
There is a growing demand for faster and better connections all around the world. Telecommunication companies constantly look for the ways to meet that demand. However it requires significant capital expenditure as technologies change fast and equipment of companies depreciate.
In many countries companies have a monopoly as they are treated as critically important and protected from competition by governments. However industry‘s rapid transition to wireless communications reduces market entry barriers. At present there are many players in market, particularly in household and small business segments. It leads, from time to time, to price war for the market share. Corporate customers are less price sensitive than households. They also readily buy such products as high security private networks and video conferencing. Traditional telecoms should adapt to the fast changing environment in order to protect their customer base.
Telecom operators with extended networks provide the connectivity to other telecom companies. Smaller companies should pay for it so that they could provide their services to customers.
Even though the stock prices of telecommunication companies can sometimes be quite volatile, the industry is viewed as the defensive one since a steady demand for services and stable customer basis allow for the stable revenue for companies.
Income investors usually find the larger telecommunications companies attractive as they pay and regularly raise dividends.
Sectors of the Industry
According to the Industry Classification Benchmark (ICB), Telecommunications industry consists of the following sectors.
|Telecommunications||Fixed Line Telecommunications||Fixed Line Telecommunications|
|Mobile Telecommunications||Mobile Telecommunications|