With the growing reliance on wireless communication, a rapid shift towards 5G network, and expanding data demands globally, the telecom industry is well-positioned for stability. Therefore, I think fundamentally sound telecom stocks, KT Corporation (KT), PLDT Inc. (PHI), and TIM S.A. (TIMB) could push investors portfolio towards success.
In the telecom industry, a company’s success is mainly dependent upon its service delivery quality and adaption to newer digital technologies. Technological trends, including 5G technology, cloud computing, and the adoption of AI in customer services, will shape the telecom industry.
The 5G services market is expected to total around $1 trillion by 2028, growing at a CAGR of 52.4%.
Furthermore, owing to increased spending on next generation wireless communication setups due to the shift in the preferences towards 5G networks and cloud based technology is driving the telecom service market. Also, with rapid digitalization across the world and an explosion of ott platforms, the market is expected to grow significantly.
The global telecom services market is expected to grow at a CAGR of 4.9% until 2030.
Moreover, the proliferation of smartphones, Iot devices, and bandwidth-intensive applications is leading to data traffic growth, significantly boosting the telecom cloud industry. As users increasingly demand faster and more reliable connectivity, telecom operators need to leverage cloud technologies to efficiently manage their networks ensuring seamless connectivity.
Therefore, telecom cloud market is projected to grow at a CAGR of 19.5% until 2032.
Considering these conducive trends, let’s take a look at the fundamentals of the three telecom stocks.
Stock #3: KT Corporation (KT)
Based in Seongnam, South Korea, KT provides integrated telecommunications and platform services in Korea and internationally. The company offers fixed-line telephone services, including local, domestic long-distance, international long-distance, and voice over Internet protocol telephone services, as well asinterconnection services; broadband Internet access service and other Internet-related services; and data communication services, such as fixed-line and leased line services, as well as broadband Internet connection services.
KT’s trailing-12-month gross profit margin of 56.94% is 15.7% higher than the industry average of 49.22%. Its 12.22% trailing-12-month CAPEX/Sales is 193.3% higher than the 4.17% industry average.
During the third quarter, which ended September 29, 2023, KT’s operating revenue grew 3.4% from the previous-year quarter to KRW6.70 trillion ($5.11 billion). The company’s net reported net income and EBITDA of KRW288.30 billion ($219.87 million) and KRW1.26 trillion ($960.85 million).
Analysts expect KT’s revenue to be $3.45 billion for the first quarter ending March 2024.
Over the past nine months, the stock has gained 27.5% to close the last trading session at $14.57. KT has a 24-month beta of 0.16.
KT’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value and Stability. It is ranked #7 out of 44 stocks in the A-rated Telecom - Foreign industry.
Beyond what is stated above, we’ve also rated KT for Sentiment, Momentum, Quality, and Growth. Get all KT ratings here.
Stock #2: PLDT Inc. (PHI)
Headquartered in Makati City, the Philippines, PHI provides telecommunications and digital services in the Philippines. The company operates through three segments: Wireless; Fixed Line; and others.
PHI’s trailing-12-month gross profit margin of 74.06% is 50.5% higher than the industry average of 49.22%. Its trailing-12-month EBIT margin of 15.59% is 85% higher than the 8.42% industry average.
For the nine months ended September 30, 2024, PHI’s revenues from contracts with customers increased 2.8% year-over-year to ₱156.36 billion ($2.79 billion). The company’s net income increased marginally year-over-year to ₱28 billion ($499.63 million). Also, EPS attributable to common equity holders of PLDT increased marginally year-over-year to ₱128.83.
The company’s revenue and EPS are expected to rise 4.3% and 5.3% year-over-year to $3.93 billion and $2.82, respectively, in the fiscal year ending December 2024.
Shares of PHI has gained 7.7% over the past nine months to close the last trading session at $23.05. PHI has a 24-month beta of 0.12.
It’s no surprise that PHI has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
PHI has an A grade for Sentiment and a B in Stability, Quality, and Growth. It is ranked #4 in the same industry.
In addition to the POWR Ratings highlighted above, one can access PHI’s ratings for Momentum and Value, here.
Stock #1: TIM S.A. (TIMB)
Based in Rio de Janeiro, Brazil, TIMB provides mobile voice, data, and broadband services in Brazil. The company offers in mobile, landline, long-distance, and data transmission services.
TIMB’s trailing-12-month EBIT margin of 20.13% is 138.9% higher than the industry average of 8.42%. Its trailing-12-month gross profit margin of 51.76% is 5.2% higher than the industry average of 49.22%.
During the fourth quarter that ended December 31, 2023, TIMB’s net revenue marginally increased year-over-year to R$23.84 billion ($4.80 billion). Also, the company’s net profit for the year grew 5.6% from the year-ago value to R$2.84 billion ($571.88 million). Its EPS increased % year-over-year to R$1.17.
Street expects TIMB’s revenue to increase 6.2% year-over-year to $5.11 billion for the fiscal year ending December 2024. The company’s EPS for the same year is expected to come in at $1.38, up 25.2% from the prior year.
Over the past year, the stock has gained 57.9% to close the last trading session at $17.65. TIMB has a 24-month beta of 0.17.
TIMB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B in Stability. It is ranked #3 in the same industry.
Click here to access the additional TIMB ratings (Growth, Momentum, Value, and Sentiment).
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KT shares were trading at $15.03 per share on Tuesday afternoon, up $0.46 (+3.16%). Year-to-date, KT has gained 11.83%, versus a 4.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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