What are the Advantages of Investing in the Telecom Sector?

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What are the Advantages of Investing in the Telecom Sector?

According to Invest India, as of February, 2024, India has the second largest telecommunications industry in the world with a subscriber base of 1.084 billion. The Government of India has shown its support for the promotion of this industry time and again. 

In this article, we will look into the advantages of investing in the telecom sector in India.

Overview of the Telecom Sector

The telecom sector consists of companies that make communication possible at national-level as well as international-level, whether through the phone, internet, cables or over airwaves. Telecom companies create infrastructure which enables data in the form of text, voice, audio or video to be sent in any part of the world. Telephone operators, cable companies, satellite companies and ISPs are the largest companies in the telecom sector. 

Over the past few decades, the telecom sector has played an essential role in the economic growth and development of India. This sector has helped in the empowerment of the masses, unlocked economic growth, generated employment and enabled digital transformation of important services such as educational, financial and healthcare-related services.

In India, the telecom sector is regulated by the Telecom Regulatory Authority of India (TRAI). The mission of this authority is to ensure the protection of consumer interests and nurture conditions for the telecom sector’s growth at a pace which will enable India to play a leading role in the emerging society of global information. TRAI gives advice to GOI regarding matters related to the telecom sector. GOI has taken many initiatives to show its support for the telecom sector. One such initiative is its approval for 100% Foreign Direct Investment (FDI) in the telecom sector under an automatic route to boost investment. 

Department of Telecommunications (DoT) is a government department that functions as per the orders and regulations of TRAI. Major telecom licenses such as ISP License and UL VNO License are issued by DoT.

Investing in Telecommunications

Among equities, telecom companies are a rarity. These companies have displayed characteristics of both income and growth stocks. Small companies that offer wireless services have given opportunities for share price appreciation to the growth investors. Whereas larger companies dealing with telecom equipment and services have provided opportunities for the investors focused on generating income through investments. The telecom sector may also provide good opportunities for the value investors.

All businesses go through some sort of changes, but their need for the telecom sector remains unchanged. While the need is constant, individual suppliers can grow or reduce in number. A telecom company may reach its peak in success and provide dividends to the investors. And then, after a period of time, it can fall drastically due to recession, pandemic, changes in rules and regulations by the Government or technical advances and find it hard to recover from the losses. While making an investment, investors must always keep in mind that investing in stocks is subject to market risks. Investors need to be aware of all the pros and cons while making investment decisions. 

Top Telecom Companies in India by Market Cap (BSE)

As of April 19, 2024, the following companies are the top telecom companies in India based on their market capitalization (BSE):

Source: Moneycontrol

Note: At present, Vodafone Idea is offering Follow-on Public Offer (FPO) to the investors till 22nd April, 2024. The stock of Vodafone Idea FPO has a face value of ₹10 per share and the price band for the book building FPO has been set between the range of ₹10 to ₹11 per share. 

Conclusion

According to Invest India, the National Investment Promotion and Facilitation Agency, the telecom industry is one of the most important sectors in the Indian economy and contributes 6.5% to the GDP of the country. Investing in the telecom sector can be advantageous to the investors. However, they must also take into account the drawbacks while making investment decisions. It is necessary to be aware of the fact that investments in the securities market are subject to market risks. Therefore, an investor must do proper research and have a deep understanding of the securities market. If you’re interested in obtaining any telecom license such as NLD/ILD License, ISP License or UL VNO License, you may contact Telecom License Consultants at Registrationwala.

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