Over the last decade, the Telecommunications sector has gone through a period of rapid structural change. The development of new communication systems, such as Voice over Internet Protocol (VoIP), by the world’s largest and most innovative technology companies, has chipped away at the revenues generated by the traditional Telecoms stalwarts.

The impact of intense cross-sector competition has led to the Telecommunications sector being one of the worst performing sectors over the last 5 years. The FTSE All Share Telecommunications benchmark has fallen by a staggering -61.86% over this timeframe, as opposed to a -4.18% fall in the FTSE All Share. This has similarly been reflected across the world, with many large Telecoms operators diversifying their operations into other sectors to try and cope with the unfavourable market dynamics.


However, after a lacklustre performance for the best part of this decade and a prolonged period of secular stagnation, the development of 5G communications could change the fortunes of many companies within the sector. An excellent research paper published by IHS Markit estimates that the total 5G value chain will contribute $3.5 trillion in output and support over 22 million jobs in 2035. In fact, over the period from 2020-2035, IHS believes that the total contribution of 5G to world GDP will be similar to an economy the size of India.

In this article, we will explore the impacts of the pandemic on the Telecommunications sector and assess the performance of the industry groups within the sector in more detail. The article will also evaluate some valuation metrics of the industry groups and take a closer look at some of the top-ranking stocks in the sector, highlighting how these companies have responded to the pandemic and what may possibly lie ahead.

Performance of the Industry Groups


Of the two industry groups within the broader Telecommunications sector, the Fixed Line Telecommunications industry has fared far worse, with the benchmark almost halving since the start of the year. The benchmark tracks the performance of BT, TalkTalk and Telecom Plus and the former two have suffered from an accelerated deterioration in performance since the outbreak of Covid-19.

In recent years, fixed line telecommunications companies have suffered from the shift away from landline telephones to other means of communication. According to…

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