The consumer and enterprise shift to data services and digital engagement has been driving the telecom sector’s growth over the past two years. This trend will likely continue in 2022, given the rapid 5G rollout and adoption of software-centric networks, increasing interest in multi-access edge computing and private cellular networks, and a surge in demand for high-quality communications, internet, and other value-added managed services.
According to a report by The Business Research Company, the telecoms market is projected to reach $3.45 trillion in 2022, growing at a CAGR of 6%. The rapid tech integration across virtually every industry is expected to shape the telecom industry’s future.
Given these factors, it could be profitable to invest in quality telecom stocks Chunghwa Telecom Co., Ltd (CHT), Telefónica, S.A. (TEF), and Telefónica Brazil S.A. (VIV).
Chunghwa Telecom Co., Ltd (CHT)
Headquartered in Taipei City, Taiwan, CHT is a telecommunication services provider that operates through five segments: Domestic Fixed Communications Business; Mobile Communications Business; Internet Business; International Fixed Communications Business; and Other. The company offers local and domestic telephone and leased lines, broadband access, Wi-Fi, multimedia on-demand services, and information and communication (ICT) services.
Last month, CHT issued unsecured corporate bonds of up to NT$10 billion ($358.86 million). The proceeds will be used to finance CHT’s business developments, including environmental and social development investments. Using the proceeds from these bonds, the company might attain its sustainable development by integrating business operations and plans.
Last November, CHT, and Viettel-CHT, a joint venture company established between CHT and Viettel Group, signed a contract to offer the public cloud services and cloud-based applications in Vietnam, and is aimed at the digital transformation of the Vietnamese enterprises. This partnership is expected to expand CHT’s business prospects and boost revenues.
In its fiscal fourth quarter, ended Dec. 31, 2021, CHT's operating revenue increased marginally year-over-year to NT$59.89 billion ($2.15 billion). CHT's income from operations grew 5.8% year-over-year to NT$11.10 billion ($398.33 million). Its EBITDA increased 4.8% year-over-year to NT$20.86 billion ($748.57 million). The company's consolidated net income increased 5.5% from the year-ago value to NT$9.06 billion ($325.12 million), and its earnings per share rose 5.1% year-over-year to come in at NT$1.11.
The $1.86 billion consensus revenue estimate for its fiscal first quarter, ending March 31, 2022, represents 3.9% year-over-year growth.
Shares of CHT have increased 4.3% in price year-to-date and 12.6% over the past year, respectively. It closed Friday’s trading session at $44.03.The stock is currently trading marginally below its 52-week high of $44.08, which it hit on Feb. 18, 2022.
CHT's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
CHT has an A grade for Stability and a B grade for Quality and Sentiment. Within the A-rated Telecom - Foreign industry, it is ranked #23 of 49 stocks. To see additional POWR Ratings (Value, Momentum, and Growth) for CHT, click here.
Telefónica, S.A. (TEF)
TEF offers telecommunications services in Europe and Latin America and is headquartered in Madrid, Spain. The company provides a wide range of telecommunication services, including PSTN lines, public telephone services, ISDN accesses, domestic and international long-distance and fixed-to-mobile communication services, corporate communications, supplementary value-added services, and telephony information services.
On Aug. 19, 2021, TEF partnered with ViaSat, Inc. (VSAT), a global communications company, to improve the availability of fast and reliable satellite internet service aimed at businesses in Brazil. Under this agreement, TEF will be a wholesale distributor of ViaSat’s high-speed internet services in Brazil. This partnership is expected to expand its footprint offering, reach new customers, and boost revenue streams.
TEF's operating income before D&A increased 111.6% year-over-year to €9.80 billion ($11.09 billion) in its fiscal third quarter, which ended September 30, 2021. Its operating income improved 437% year-over-year to €14.33 billion ($16.22 billion). Its net income attributable to equity holders of the parent grew 1291.2% year-over-year to €9.34 billion ($10.57 billion). And its earnings per share rose 1937.5% year-over-year to €1.63.
The stock gained 15.1% in price year-to-date and 6.6% over the past year, respectively. TEF closed Friday's trading session at $4.88. The stock is currently trading 5.9% below its 52-week high of $5.17, which it hit on May 19, 2021.
TEF has an overall rating of B, which translates to Buy in our proprietary rating system. TEF has a grade of A for Value and B for Sentiment and Stability. Among the 49 stocks in the A-rated Telecom - Foreign industry, it is ranked #19.
Click here to see the additional POWR Ratings for Momentum, Growth, and Quality for TEF.
Telefônica Brasil S.A. (VIV)
VIV provides mobile and fixed telecommunications services to residential and corporate customers in Brazil. It is headquartered in Sao Paulo, Brazil. The company’s services portfolio includes fixed-line services, voice and broadband internet access, mobile value-added services, wireless roaming services, data services, pay-tv services, network services, digital services, financial services, and multimedia communication services.
In its fiscal third quarter, ended Sept. 30, 2021, VIV's net operating revenue increased 2.2% year-over-year to R$11.03 billion ($2.15 billion). The company's reported EBITDA increased 11.8% year-over-year to R$4.83 billion ($939.54 million). And its net income grew 8.5% year-over-year to R$1.32 billion ($256.77 million).
The $2.05 billion consensus revenue estimate for the fiscal first quarter ending March 2022 represents 3.4% year-over-year growth from the same period last year. The consensus EPS estimate of $0.15 for the ongoing quarter indicates 50% year-over-year growth from the same period in 2021.
Over the past year, shares of VIV have gained 13.6% and improved 11.9% year-to-date. VIV closed Friday's trading session at $9.68. The stock is currently trading marginally below its 52-week high of $9.72, which it hit on Feb. 11, 2022.
The company has an overall rating of B, which translates to Buy in our proprietary rating system. VIV has a grade of A for Quality and B for Stability. Among the 49 stocks in the A-rated Telecom - Foreign industry, it is ranked #7.
Click here to see the additional POWR Ratings for Momentum, Value, Growth, and Sentiment for VIV.
CHT shares were unchanged in premarket trading Tuesday. Year-to-date, CHT has gained 4.31%, versus a -8.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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