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Why Telecom Stocks Hold Potential In India And May Be Good Bets For The Long Term

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Soon after the market slump in March, pharma and FMCG stocks looked like obvious safe-haven bets among equities. However, after the back-to-back deals from foreign investors for Jio Platforms and the brokerage house Jefferies' view that Bharti Airtel's value could double in 3 years, one would want to relook at the potential these stocks hold and what is it that these experts see in the telecom sector.

Increase in customer base/usage
 

Increase in customer base/usage

The COVID-19 induced lockdown first forced, and then habituated people to spend more time at home, especially in India where the country's battle with the virus is far from over. While most sectors that were suffering before the pandemic, the tide changed for the telecom sector.

Recently, Ericsson, in its Mobility Report for June 2020, said India's data traffic growth continued its upward trajectory and it remains the region with the highest usage per smartphone and per month.

Indians used about 12 GB data per month on an average in 2019, the highest consumption globally, and this is expected to rise even further to about 25 GB (gigabytes) per month by 2025, driven by affordable mobile broadband services and changing video viewing habits, according to the report.

Digital ecosystem

Digital ecosystem

In India, the telecom space is not simply for connectivity purposes like the rest of the world but is gradually creating a digital ecosystem. Given that only 4 percent of households have fixed broadband, smartphones are the only way to access the internet for many and telecom operators are encashing the potential of wireless services alone that falls within its dynamic.

Wifi routes with sim cards that provide 4G internet speed at competitive prices in remote areas of the country have helped telecom operators increase subscriber base.

These companies have also entered the home entertainment space, allowing users to watch TV on their mobile phones anywhere. Before the COVID-19 pandemic as well, the scene of an Indian engrossed in the latest episode of their favourite show during their commute to work/college was common.

Now with a higher number of people working from home and also entertaining themselves at home, there could be an increase in demand for fixed wired line broadband services that these companies have ventured into.

As people increasingly consume music and movies online over their smartphones, telecom companies can also earn from online advertising.

Cross-selling products
 

Cross-selling products

In India, the telecom space is not simply for connectivity purposes like the rest of the world but is gradually creating a digital ecosystem. Given that only 4 percent of households have fixed broadband, smartphones are the only way to access the internet for many and telecom operators are encashing the potential of wireless services alone that falls within its dynamic.

Wifi routes with sim cards that provide 4G internet speed at competitive prices in remote areas of the country have helped telecom operators increase subscriber base.

These companies have also entered the home entertainment space, allowing users to watch TV on their mobile phones anywhere. Before the COVID-19 pandemic as well, the scene of an Indian engrossed in the latest episode of their favourite show during their commute to work/college was common.

Now with a higher number of people working from home and also entertaining themselves at home, there could be an increase in demand for fixed wired line broadband services that these companies have ventured into.

As people increasingly consume music and movies online over their smartphones, telecom companies can also earn from online advertising.

Read more about: telecom investment
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