We should not be too surprised to learn that tier-one telco equity prices have not changed very much over the past few years. Companies in an industry with relatively slow incremental revenue growth, facing significant profit challenges, should find those trends reflected in their share prices.
Over a longer period of time, revenue has grown from the global recession of 2008 levels, but profit margins have declined. Some might predict a further dip as capital investment in 5G networks is made. Some of us think mobile operators have new tools and incentive to control such investments, in many cases even achieving 5G upgrades within the scope of existing capex budgets.
The bottom line is that the telecom business, in monopoly or present competitive conditions, has never been a “growth” business, so we should never be surprised about relatively muted revenue growth or share price performance.
The real battles are about maintaining modest growth, profit margins and cash flow as changes in the product mix and competitive challenges remain. It is not precisely “running in place,” more like “slow, steady ascent,” but that is a fairly reasonable way to describe a positive outcome.
If outcomes are a bit boring, the execution challenges will be anything but.
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