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BCE, CenturyTel, Rogers Communications, Qualcomm and American Tower

^{Published on 2010-06-24 14:12:15 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: BCE Inc. (NYSE: [ BCE ]), CenturyTel Inc. (NYSE: [ CTL ]), Rogers Communications Inc. (NYSE: [ RCI ]), Qualcomm Inc. (Nasdaq: [ QCOM ]) and American Tower Corp. (NYSE: [ AMT ]).

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Here are highlights from Wednesdaya™s Analyst Blog:

Telecom Industry Outlook - June 2010

An improving U.S. economy together with fabulous demand for mobile data and value-added services (VAS) has been the silver lining for the telecommunication industry in an otherwise tough environment. While our overall view is neutral for the industry, the recent sell-off has created attractive opportunities in a number of stocks.

The industry encompasses a lot of technology-related businesses. Besides the traditional local and long-distance wire-line telephone services, telecommunications also include wireless communications, Internet services, fiber optics networks, cable TV networks and satellite communications.

We believe that the overall economic dynamics may shift in favor of the telecommunications industry, although at a very slow pace, primarily due to its basic nature of being a major infrastructure product for both emerging and developed nations. Economic stimulus plans throughout the world -- including the U.S. broadband infrastructure development program and similar structural subsidies in China and India -- may be a boon for selected telecom service providers and equipment manufacturers.

Capital spending constraints among carriers over the last couple of years due to severe recessionary conditions was the main hindrance for the growth of this industry. However, with the economic recovery firmly in place, large telecom service providers are gradually expanding their fiber-based networks on the back of significant subscriber growth.

Major recovery in the telecommunications sector is coming from a significant increase in demand for mobile data and other value-added services. As of now, there are more than 1 billion 3G subscribers worldwide, with steady growth expected for quite some time. Various industry sources estimate that smartphone shipments as a percentage of total mobile handset shipment are expected to increase from 20% in 2009 to nearly 40% by 2014. Smartphones are taking market share from basic mobile handsets. These devices are generally characterized by powerful operating systems capable of supporting a variety of services and applications that need very high-speed network infrastructures.

Several giant telecom operators globally are funding projects to deploy next-generation (4G) high-speed networks of WiMAX and LTE (Long-Term Evolution). Cable TV operators, which are major competitors to the telecom giants, are also upgrading their networks with high-speed DOCSIS 3.0 architecture. These developments are likely to help telecom equipment manufacturers consolidate their top-lines.

The growth of high-speed Internet and video services leads to continued upgrades of telecommunications networks. As of now, both the telephone service providers and cable TV operators are offering cable television, high-speed Internet, and phone services. This, in turn, is favorable for the demand for telecom equipment, which is expected to benefit equipment manufacturers.

OPPORTUNITIES

Telecom carriers and equipment providers that offer the most attractive opportunities are focused on 3G wireless technologies, emerging 4G technologies, broadband and fiber-to-the-home/premises networking. We have seen that sector diversity is a less secure natural hedge in todaya™s increasingly correlated world markets. The telecommunications industry as a whole offers a number of attributes that are difficult to ignore for most investors.

• Telecommunications is a necessary utility: The need for telecom in both rural and urban areas, and its role in the infrastructure of both developed and developing markets, continues to grow. In addition, economic stimulus plans in the U.S. and throughout the world should boost selected service providers and equipment manufacturers.
• Massive growth of smartphones: In spite of the challenging global economy, the growth in the smartphone mobile market remains impressive. This primarily reflects a shift in consumer preference towards feature-enhanced PDA devices from ordinary mobile handsets used primarily for voice telephony. This opportunity provides scope for telecom service providers, equipment manufacturers, chipset developers and wireless tower operators to retain new users and grow revenues moving forward.
• International diversification: While country diversification offers only limited protection in the current highly-correlated world equity markets, it offers hedging opportunities from local economic weakness and associated currency exchange differentials. Therefore, a significant allocation of foreign telecom companies would be appropriate as part of a technology-focused portfolio.

Companies that match well with these considerations include BCE Inc. (NYSE: [ BCE ]), CenturyTel Inc. (NYSE: [ CTL ]), Rogers Communications Inc. (NYSE: [ RCI ]), Qualcomm Inc. (Nasdaq: [ QCOM ]) and American Tower Corp. (NYSE: [ AMT ]).

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