In This Article:
The Zacks Wireless Non-US industry comprises providers of mobile telecommunication and related services and products for consumer, enterprise and wholesale customers. They offer state-of-the-art voice services, including local calls, domestic and international long-distance calls and roaming services, prepaid and postpaid, and value-added services. The companies also provide wireless Internet service, including digital applications such as music, video and animation, wireline broadband services and wireline voice services through wireline voice networks.
Some of the companies sell various mobile handsets and accessories through dealer network and offers co-billing services to other telecommunication service providers. In addition, some industry participants provide devices and software platform for managing security, mobility and communications among hardware, programs, mobile apps and the Internet of Things (IoT).
Let’s take a look at the industry’s three major themes:
• The global wireless telecommunications ecosystem has continued to witness considerable growth due to rapid technological advancements, evolving consumers’ need and increasing smart device usage to access real-time data. Wireless carriers across national territories have expanded their service portfolios to include a wide array of offerings to capitalize on growth opportunities across technology, media and telecommunications in areas such as enterprise cloud, TV, IoT, augmented and virtual reality, and autonomous vehicles, among others. However, adjacent market segments tend to offer lower margins, and disruptive competitors are well positioned in key segments such as cloud and advertising. These pose concerns for wireless operators in service portfolio expansion.
• Broad-based industry growth is expected over the next five years as carriers complete 5G superfast network rollouts and benefit from the burgeoning demand for data services. The majority of wireless subscription addition has stemmed from emerging markets, particularly India, China, Japan and Africa. Markets in developed economies have mostly reached saturation levels, preventing wireless carriers from achieving the subscriber growth rates of their counterparts in emerging economies, and leading them to focus on increasing average revenue per user (ARPU). Latin American countries such as Brazil, Mexico and Argentina are also slated to offer significant opportunities as the degree of penetration of high-speed broadband, 4G services and the usage of smartphones rise. Notably, 4G LTE deployment and network upgrades are the key trend around the world at present, and in select markets there is also massive investment in fixed broadband based on fiber. 5G developments have gained pace and will continue to be a key area of focus in 2019 and beyond.
• Geographically, the wireless telecommunication services market is divided into seven key regions — North America, Latin America, Eastern Europe, Western Europe, Japan, Asia-Pacific excluding Japan and the Middle East & Africa. North America holds the largest revenue share followed by Europe and Asia Pacific owing to major technology providers based in these regions, and easy adoption of these technologies by the population. Japan, Middle East and Africa, and Latin America hold significant potential for growth in the market, raising demand for wireless services. However, high capital expenditure to extend network infrastructure for mobile connectivity and cut-throat competition is forcing down prices, leading to aggregate lower ARPU for telecom operators.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Wireless Non-US industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #25, which places it at the top 10% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates healthy near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. The industry’s earnings estimates for 2019 have been raised 24.5% over the past year.
Before we present a few non-U.S. wireless stocks that are well positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector, S&P 500
The Zacks Wireless Non-US industry has underperformed both the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 8.9% over this period against the S&P 500’s rise of 2%. Meanwhile, the broader sector has gained 1%.
One-Year Price Performance