Telecommunications is a vital industry witnessing rapid technological improvement. Unprecedented growth in high-speed mobile Internet traffic, particularly with respect to wireless data and video, has transformed this industry into the most evolving, inventive and keenly contested space.
In addition, a major characteristic of the telecommunications industry is that it is immune to international geopolitical disturbances even when they lead to economic fluctuations. The need to remain connected is human, springing from our earliest tendencies to communicate. An era of digitization and technology is essentially built on this human craving. It is here that telecommunications come to the fore as a necessary utility.
Therefore any non-U.S. economic volatility is not expected to have an immediate impact on the industry. Ongoing turmoil in the global economy due to a persistent slowdown in China and its currency devaluation together with the sovereign debt crisis in Europe had little impact on the telecommunications sector.
The U.S. telecommunications industry is presently on a growth trajectory and the momentum is likely to sustain through 2015.
2 Key Features
The telecommunications industry has two key features that are difficult to disregard from the standpoint of investors.
Barrier to Entry: The telecommunications industry is characterized by a high barrier to entry. The deployment of network infrastructure requires significant capital expenditure, which very few entities can afford. Furthermore, it is not easy for a new telecom carrier to establish itself in the market as it requires government approval to transmit voice, data, and video. Thus, this barrier protects the profits of incumbents.
Strong Demand: A growing economy speeds up the demand for real-time voice, data, and video manifold. The escalation in demand has encouraged telecom service providers to undertake large network extensions while upgrading plans. The rising demand for technologically superior products has been a silver lining for the telecommunication industry in an otherwise tough environment.
