Home Business Your next multibagger could be from the telecom sector

Your next multibagger could be from the telecom sector

5G Telecom Stocks Could Be the Next Multibagger

Back in 2008, newspaper vendors gained far more importance than they are today. After all, every morning their little shops would be crowded around either to read or to buy the latest prints.

But in January 2008, the newspaper seller became a rockstar.

cause? They were selling priceless application forms for Reliance Power IPO at a hefty premium.

On my way to work, despite the ridiculous pricing of forms, I often had long queues to buy forms from the vendor.

Mobile SIM card vendors in India received similar praise in 2013. With a record drop in call prices from Airtel, Reliance Tata and Vodafone, customers queued up to buy multiple SIM cards.

Telecom operators compete on the basis of value-added services. But the only service that was offering them additional revenue was Caller Tune!

It goes without saying that both the power and telecom bubbles burst in 2008 and 2013 respectively.

Companies like Reliance Power, Tata Communication and Reliance Communication became the poster boys of shareholder wealth destruction.

Sectors like power and telecommunications could have been the pillars of growth for the growing economy. Instead, they became untouchable to investors and policymakers alike.

Therefore, it is difficult to imagine that the fortunes of these regions will change dramatically a decade later. Power and telecom are now the most sought-after opportunities among policy makers and investors.

Electricity stocks assumed importance with digitization and electric vehicle revolution, In fact, as I explain in my video below, some power stocks have once again enjoyed irrational enthusiasm over the past year.

But telecom stocks are yet to find a place in the sun.

There have been many significant changes in the dynamics of the Indian telecom sector in recent times.

The relevance of this industry increased significantly after the pandemic. Telecommunication services have become a necessity for virtual connections. The smartphone market will continue to grow as more people are expected to buy them in the coming years.

More importantly, the industry has once again become the focus of policy makers and investors alike.

Government reforms have eliminated ambiguity and risks to establish a stable investment environment.

Telecom penetration had slowed down with the poor health of major companies. But with the launch of 5G, the government plans to make internet services accessible across the country. In this, rural areas have been included in the next two to three years by making 5G affordable.

At present, 59.4% of rural areas and 87.3% of urban areas enjoy telecom connections. But these figures may soon become history, for the following reasons…

  • Production Incentive (PLI) schemes for the telecom sector will give a boost to telecom equipment manufacturing.
  • Public Wi-Fi services will be offered across the country through Public Data Offices (PDOs). Around 2,400 Wi-Fi hotspots will be free internet zones at 100 train stations in 22 states.
  • By 2025, the government plans to lay optical fiber in all gram panchayats and enable broadband connectivity in every village.
  • In October 2022, the government approved Rs 260 billion to install 25,000 mobile towers in 500 days. With this project the government aims to do with telecommunications, which it did for banking with Jan Dhan.

Last mile internet connectivity can give a big boost to India’s startup ecosystem. It is estimated that over the next five years, India will add 500 million new internet users as mobile phone penetration increases and data costs fall.

This will create opportunities for new businesses ranging from food delivery and e-commerce to online insurance.

5G-centric technologies Such as Internet of Things (IoT), artificial intelligence (AI), robotics and cloud computing will increase customers and create new investment opportunities.

Not surprisingly, India’s telecom sector is now projected to receive an investment of over US$ 25.2 billion over the next two years.

Days of major IPOs and consumer frenzy may be behind this sector. But the Indian telecom sector is clearly waiting for some interesting times ahead.

But before you decide to invest in telecom stocks to ride the megatrend, keep a few things in mind. It is important to be selective about buying telecom stocks in terms of their financial health.

  • The business should inherently have solid long-term strategy. You must be patient to see the strategy run for many years… possibly decades.
  • The company’s cash flow should not depend on additional leverage.
  • And most importantly, management must have a track record of creating wealth for minority shareholders.

Be sure to check your health Preferred 5G Telecom Stocks for free Equitymaster Screener,

Here, apart from getting access to the readymade watchlist following various topics, you can also create your own watchlist to benefit from megatrends like 5G-telecom.

Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.

This article is syndicated from equitymaster.com,

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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