This year, telecom companies are embracing generative AI for improved services and navigating organizational shifts toward flatter structures. Moreover, given the rising demand in the sector, investors could consider buying quality foreign telecom stocks SK Telecom Co., Ltd. (SKM), Millicom International Cellular S.A. (TIGO), and Telefônica Brasil S.A. (VIV).
The telecommunications industry is significantly expanding, driven by the emergence of 5G technology and the growing demand for high-quality communication. These advancements are driving growth by offering faster connectivity and lower latency, impacting various sectors such as e-commerce, healthcare, and transportation.
Moreover, the latest survey of tech and telecom B2B decision-makers shows a positive investment outlook, with cybersecurity, product features, and integrations as top priorities. Cloud providers and tech manufacturers are positioned to gain market traction, signaling a shift in vendor preferences.
On top of it, telcos, barely finished with the 5G rollout, are already discussing "5.5G" at events like Mobile World Congress, signaling the next evolution of mobile networks. 5.5G promises faster speeds, enhanced applications like mixed reality, and several technological advancements such as IoT and autonomous vehicles.
The global telecom market is poised to grow at a CAGR of 6.2% to hit $3.10 trillion by 2030.
Furthermore, AI in the telecom market is growing rapidly due to factors such as network optimization and automation, driving innovation and improved customer experiences. These advancements enhance network efficiency and proactive maintenance, leading to market expansion.
The global AI in telecom market size is expected to grow at a CAGR of 40.4% to reach $21.20 billion by 2030.
Considering these conducive trends, let’s assess the fundamentals of the three top Telecom - Foreign industry picks, beginning with the third choice.
Stock #3: SK Telecom Co., Ltd. (SKM)
Headquartered in Seoul, South Korea, SKM is a telecommunications firm providing cellular and fixed-line services, including voice/data transmission and broadband internet. It also offers diverse services like T-commerce and media platforms under brand names such as T Deal and Nate.
On March 31, 2024, SKM expanded its AI personal assistant, "A.", adding call-related features like "A. Call Translator" for Android users and an "AI Spam Indicator" for spam protection. These upgrades aim to improve communication experiences for all subscribers, offering call recording, summary features, and "Biz Contact" for easy access to business numbers.
On February 27, SKM, Iceotope Technologies, and SK Enmove collaborated to develop liquid cooling techniques for energy-efficient AI data centers, aiming to reduce power consumption. The partnership will deploy Precision Liquid Cooling (PLC) technology at SKM's AI Data Center Testbed, with plans to develop an AI-based autonomous cooling system for higher operational efficiency.
SKM’s trailing-12-month CAPEX/Sales of 16.89% is 332.3% higher than the industry average of 3.91%. The stock’s trailing-12-month cash from operations of $3.82 billion is significantly higher than the $305.27 million industry average.
During the fourth quarter, which ended December 31, 2023, SKM’s operating revenue rose 3% year-over-year to KRW4.53 trillion ($3.35 billion). The company’s operating income and EBITDA increased 16.7% and 4% from the prior year’s quarter to KRW297.10 billion ($219.79 million) and KRW1.24 trillion ($915.02 million), respectively.
Furthermore, the company reported a consolidated net income of KRW187.40 billion ($138.63 million).
Street forecasts SKM’s revenue and EPS for the fiscal year ending December 2024 to increase 44.5% and 5.5% year-over-year to $13.61 billion and $2.20, respectively. Shares of SKM have surged 8.8% over the past nine months to close the last trading session at $21.23.
SKM’s POWR Ratings reflect this strong outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B for Stability. In the A-rated Telecom - Foreign industry, SKM is ranked #9 among 44 stocks.
To access additional ratings for SKM’s Growth, Momentum, Sentiment, and Quality, click here.
Stock #2: Millicom International Cellular S.A. (TIGO)
Based in Luxembourg, TIGO provides mobile and cable services, offering a wide range of products, including mobile data, voice, financial services, broadband, and pay-TV under the Tigo and Tigo Business brands. The company caters to residential and business customers, delivering connectivity solutions across diverse markets.
On March 28, 2024, TIGO announced that it had repurchased 23,831 of its Swedish Depository Receipts (SDRs) between March 25 and March 28, 2024, totaling 705,905 treasury shares. Citigroup Global Markets Limited executed the repurchases on Nasdaq Stockholm, with 172,096,305 shares outstanding as of March 28, 2024.
On February 20, TIGO partnered with Harmonic Inc. (HLIT) to roll out XGS-PON fiber-to-the-home (FTTH) services, providing faster and more reliable broadband experiences across Latin America. HLIT's cOS platform simplifies network management, accelerates deployment, and enhances internet options for millions of subscribers.
TIGO’s trailing-12-month CAPEX/Sales of 14.38% is 268.05% higher than the industry average of 3.91%. Likewise, the stock’s trailing-12-month cash from operations of $1.22 billion is 300.64% higher than the $305.27 million industry average.
TIGO’s revenue increased 6.8% year-over-year to $1.42 billion in the fourth quarter, which ended December 31, 2023. It posted an operating profit of $228 million. The company’s EBITDA grew 1.6% from a year-ago quarter to $557 million. As of December 31, 2023, its total assets amounted to $14.52 billion, compared to its total assets of $14.20 billion as of December 31, 2022.
TIGO aims for equity-free cash flow of about $550 million in 2024 and approximately $700 million for the period spanning 2022 to 2024, compared to the prior three-year target of nearly $600 million.
Analysts expect TIGO’s revenue and EPS to grow 3.8% and significantly year-over-year to $5.88 billion and $1.58, respectively, for the fiscal year ending December 2024. TIGO’s stock has gained 29.9% over the past six months and 31.7% over the past nine months to close the last trading session at $20.07.
TIGO’s POWR Ratings reflect this robust outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
TIGO has a B grade for Growth, Stability, and Sentiment. In the same industry, it is ranked #4.
Click here to see TIGO’s additional ratings for Value, Momentum, and Quality.
Stock #1: Telefônica Brasil S.A. (VIV)
Headquartered in São Paulo, Brazil, VIV is a prominent telecommunications company in Brazil, offering fixed line and mobile services, including voice, broadband internet, data, pay TV, and digital solutions to diverse industries through multiple distribution channels. It provides comprehensive telecommunications solutions, and IT support to various sectors.
On March 5, 2024, VIV approved a share buyback program for 2024 and 2025, aiming to acquire up to 40,827,672 common shares for treasury purposes, with a maximum amount of R$1 billion ($198.59 million). A well-executed share buyback program can contribute to enhancing shareholder value.
VIV’s trailing-12-month CAPEX/Sales of 16.91% is 332.9% higher than the industry average of 3.91%. Also, the stock’s trailing-12-month cash from operations of $3.87 billion is significantly higher than the $305.27 million industry average.
In the fourth quarter that ended December 31, 2024, VIV’s net operating revenue increased 6.9% year-over-year to R$13.54 billion ($2.69 billion). Its EBITDA rose 9.9% year-over-year to R$5.75 billion ($1.14 billion). Also, the company’s net income and EPS grew 42.1% and 42.8% over the prior-year quarter to R$1.60 billion ($317.94 million) and R$0.97, respectively.
For the fiscal year ending December 2024, analysts expect VIV’s net operating revenue to increase 4.7% year-over-year to $11.07 billion. Its EPS for the ongoing year is expected to rise 16.1% year-over-year to $0.71. Moreover, the company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 34.9% to close the last trading session at $10.02. Also, it gained 18.3% over the past six months.
VIV’s optimistic fundamentals are reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
VIV has an A grade for Stability and a B for Growth and Quality. Within the same industry, it is ranked #3.
To see additional POWR Ratings for VIV for Value, Momentum, and Sentiment, click here.
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VIV shares were trading at $10.02 per share on Tuesday morning, down $0.00 (0.00%). Year-to-date, VIV has declined -8.13%, versus a 9.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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