Should you buy telecom stocks ahead of the 5G boom? | Techno Glob


The much-anticipated 5G services are fast catching up with consumers as telcos conduct beta tests in several cities. While Bharti Airtel is currently conducting such trials in eight cities, Reliance Jio’s trial is underway in six more cities.

Vodafone Idea, however, did not mention any specific timeline. It is expected to gradually roll out 5G over the next few years.

This progress was also reflected in the September results of the television company. Bharti Airtel’s consolidated net profit rose 89% compared to a 22% rise in revenue in the second quarter.

The company aims to provide 5G services in all cities and major rural areas by March 2024.

Reliance Jio’s net income, on the other hand, grew by 28% in the quarter. Jio aims to launch its 5G network by December 2023

Both Jio and Airtel saw their average revenue per user rise to Rs 177.2 and Rs 190 respectively.

In such conditions, the future of the telecommunication sector remains open. Analysts believe that low-cost 5G services will be another disruption for the industry.

Independent market analyst Ambaresh Baliga believes that 5G could be a major disruptor for the industry. According to him, domestic telcos will be the biggest beneficiaries of 5G. 5G will further be shared between Reliance, Airtel and Vodafone. The industry is a huge part of both worlds

On the bourses, Bharti Airtel collected the most among its peers with 10% growth in FY23. Vodafone Idea fell 11% during the period compared to a 4% gain in the BSE Sensex.

However, analysts at Jefferies have downgraded Bharti Airtel shares to “hold” as they believe its growth potential has largely been impacted.

With the upcoming state elections, tariff hikes are likely to take place in the 4th quarter. In addition, according to Jefferies, network costs, as well as operating costs, are likely to rise faster during 5G deployment and deployment.

According to analysts, the rush to launch 5G services will also benefit telecom equipment suppliers.

For example, shares of Nelco, ITI and HFCL have gained 5-16% since April.

Ambareesh Baliga says he is confident of order flow with 5G launch at HFCL, Sterlite Tech.

In addition, HFCL was recently selected among 42 others for an incentive scheme related to manufacturing of telecom and network products to support import-dependent verticals of 5G equipment.

That being said, the market will follow global cues ahead of the US Fed policy outcome today. The Street is also monitoring the second-quarter results of Adani Transmission, JK Paper and M&M Financial Services, which are notable companies that will announce their September results on Wednesday.



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