Telecom services are in demand and rapidly growing, but the sector is prone to volatility. Here’s what Australian investors should know before pouring money into the telecommunication sector.
What are telecommunication services stocks?
Telecommunication services stocks belong to the telecommunications sector of the stock market. In total, there are 11 stock sectors as defined by the Global Industry Classification Standard. Each sector contains a distinct slice of the market.
The telecommunication sector is made up of companies that facilitate global communication — think telephones, mobile devices and the Internet. While the industry got its start in the 1830s with the invention of the telegraph, it’s since grown to encompass telephones, radio, computers and more.
What subcategories does it include?
The telecom sector can be broken down into three primary sub-sectors:
Telecom equipment. Companies that produce the hardware used for telecommunications, including computers, telephones, radios, transmission lines and transceiver stations belong to this sub-sector.
Telecom services. Major players in the telecom services sub-sector include telephone service providers and cable companies.
Wireless communication. Mobile network operators, Internet service providers and cloud-based services make up a majority of the wireless communication sub-sector.
How to invest in the telecommunication services sector
There are two ways to invest in telecom stocks in Australia, each with its own set of benefits and drawbacks. Individual stocks within the sector offer the opportunity for targeted investing for those who want to support individual companies. ETFs track the entire sector and bring diversification to a limited portfolio.
Stocks tend to be more profitable but are also more volatile. ETFs, on the other hand, offer stability but are accompanied by fees that typically range from 0.03% to 2.5%.
Whether you want to purchase stocks or ETFs, you’ll first need a brokerage account in Australia. Here’s a quick look at the investment process:
Select a platform. With plenty of online brokerages to choose from in Australia, compare platforms to find the broker best suited to your investment goals.
Open an account. Applications for web-based brokerages can be completed entirely online.
Fund your account. Transfer funds from an external account to begin trading.
Pick your securities. Using your platform’s research tools, filter stocks and ETFs by sector to narrow down your options.
Place an order. Once you’ve found a security you’d like to purchase, submit your order.
Watch your investments. Monitor your investments by logging into your brokerage account.
What stocks are in the telecommunication services sector?
Company summary
Telstra Group Limited engages in the provision of telecommunications and information services to businesses, governments, and individuals in Australia and internationally. It operates through four segments: Telstra Consumer and Small Business, Telstra Enterprise, Networks and IT, and Telstra InfraCo. The company offers telecommunication, media and technology products and services to consumer and business customers using mobile and fixed network technologies, as well as operates call centers, retail stores, a dealership network, digital channels, distribution systems and Telstra Plus customer loyalty program in Australia. It also provides network capacity and management, unified communications, cloud, security, industry solutions, integrated and monitoring services to government and large enterprise and business customers; wholesale services, including voice and data; and telecommunication products and services to other carriers, carriage service providers, and internet service providers, as well as builds and manages digital platforms. In addition, the company operates the fixed passive network infrastructure, including data centers, exchanges, poles, ducts, pits and pipes, and fiber network; provides wholesale customers with access to network infrastructure; provides long-term access to components of infrastructure under the infrastructure services agreement; designs and constructs fiber, exchanges, and other infrastructure; and operates the passive and physical mobile tower assets owned or operated by its subsidiary, Amplitel Pty Ltd. The company was formerly known as Telstra Corporation Limited and changed its name to Telstra Group Limited in November 2022. Telstra Group Limited was founded in 1901 and is based in Melbourne, Australia.
TPG Telecom Limited provides telecommunications services to consumer, business, enterprise, and government and wholesale customers in Australia. The company owns and operates fixed and mobile telecommunication services. It also offers mobile, voice, fibre internet, enterprise ethernet, SD-WAN, data, business answering, messaging, enterprise fixed wireless, IoT devices, cloud, mobile private network, business satellite, and call centre services. It provides its services under the Vodafone, TPG, iiNet, AAPT, Internode, Lebara, and felix brands. The company was formerly known as Vodafone Hutchison Australia Limited and changed its name to TPG Telecom Limited in June 2020. TPG Telecom Limited was founded in 1986 and is based in Barangaroo, Australia.
Historical performance
Company summary
TPG Corporation Limited provides telecommunication services to residential users, small businesses, corporate, government, and wholesale customers in Australia and internationally. TPG Corporation Limited is based in Macquarie Park, Australia. As of June 29, 2020, TPG Corporation Limited operates as a subsidiary of TPG Telecom Limited.
Historical performance
Company summary
Spark New Zealand Limited, together with its subsidiaries, provides telecommunications and digital services in New Zealand. It offers telecommunications, information technology, media, and other digital products and services, including mobile services; voice services; broadband services; internet sports streaming services; cloud, security, and service. The company also provides IT infrastructure, business cloud, business and outsourced telecommunications, software, data analytics, data center, and international wholesale telecommunications services. In addition, it offers local, national, and international telephone and data services; finance products; group insurance products; and mobile phone repair services. Further, the company retails telecommunications products and services; and distributes equipment. It serves consumers, households, small businesses, government, and large enterprises. The company was formerly known as Telecom Corporation of New Zealand Limited and changed its name to Spark New Zealand Limited in August 2014. The company was incorporated in 1987 and is headquartered in Auckland, New Zealand.
Historical performance
Company summary
Washington H. Soul Pattinson and Company Limited, an investment company, engages in investing various industries and asset classes in Australia. It operates through Strategic Portfolio, Large Caps Portfolio, Emerging Companies Portfolio, Private Equity Portfolio, Structured Yield Portfolio, and Property Portfolio segments. The company invests in various industries, such as natural resources, building materials, telecommunications, retail, agriculture, property equity, investments and corporate advisory, financial services, education, and others. Washington H. Soul Pattinson and Company Limited was founded in 1872 and is headquartered in Sydney, Australia.
Chorus Limited, together with its subsidiaries, provides fixed line communications infrastructure services in New Zealand. It offers phone and broadband services for residential and business customers; data and voice services; and asymmetric digital subscriber line and high-speed digital subscriber line broadband services, as well as solutions for transport and infrastructure. The company builds and maintains a network of fibre and copper cables, local telephone exchanges, and cabinets. In addition, it offers co-location and value added network services. Chorus Limited was founded in 2008 and is based in Wellington, New Zealand.
Hutchison Telecommunications (Australia) Limited provides telecommunications services in Australia. The company offers portfolio of fixed and mobile products under the Vodafone, TPG, iiNet, AAPT, Internode, Lebara, and Felix brands. Hutchison Telecommunications (Australia) Limited was incorporated in 1988 and is based in Barangaroo, Australia. The company is a subsidiary of Hutchison Telecommunications (Amsterdam) B.V.
Historical performance
Stock information
Market capitalization: $447892512
PEG ratio: 0
Company summary
Uniti Group Limited provides various telecommunications products and services in Australia. It operates through three segments: Consumer & Business, Wholesale & Infrastructure, and Communications Platform as a Service. The Consumer & Business segment offers telecommunications products and services, including broadband and voice services on a mixture of owned wireless infrastructure and resold fibre access networks. The Wholesale & Infrastructure segment designs, installs, operates, and maintains fibre-to-the-premises open access wholesale telecommunication "last mile' network infrastructure. The Communications Platform as a Service segment designs, develops, and delivers communications and analytics solutions to SME and large enterprise/government organizations in the form of inbound voice, Phonewords, SIP trunking, and business-grade SMS services. The company was incorporated in 2012 and is based in Adelaide, Australia.
Historical performance
Stock information
Market capitalization: $3421518080
P/E ratio: 62.375
Dividend yield: 0%
Company summary
OptiComm Ltd, a licensed carrier and wholesale network infrastructure operator, designs, constructs, operates, and maintains fibre-to-the-premises (FTTP) network solutions in Australia. The company operates in two segments, Network Operations and Construction. It undertakes construction of FTTP telecommunications networks for residential apartment buildings, and broad acre estates and commercial premises. The company offers its services to retail services providers, developers, and other customers. It also provides other ancillary value added services, such as integrated building administration support networks for building operations and other building services to hotels and apartments, shopping centers, and other commercial complexes. The company was founded in 2005 and is based in Port Melbourne, Australia. As per the transaction announced on June 14, 2020, OptiComm Ltd operates as a subsidiary of Uniti Group Limited.
Historical performance
Company summary
Dubber Corporation Limited, a software solutions company, provides unified call recording and conversation artificial intelligence services to the telecommunications industry in Europe, the United States, and internationally. It offers call recording, unified conversation capture, and conversation intelligence solutions. The company was formerly known as Crucible Gold Limited and changed its name to Dubber Corporation Limited in December 2014. Dubber Corporation Limited was incorporated in 1999 and is headquartered in Melbourne, Australia.
Historical performance
Company summary
Over the Wire Holdings Limited provides telecommunication, cloud, and IT solutions to business customers in Australia and New Zealand. The company offers data networks and internet, voice, data center co-location, cloud, and managed services. It provides cloud solutions, such as private cloud, public cloud connects, and colocation; connect solutions, including business internet, private networks, SD-WAN, and hybrid networks; collaborate solutions comprising business VoIP, hosted PBX, Microsoft teams calling, mobile fleet, and converged voice and data; and security and IT support solutions, including IT support services and data security. The company was formerly known as Impirical Pty Ltd and changed its name to Over the Wire Holdings Limited in September 2015. The company was founded in 2007 and is headquartered in Brisbane, Australia.
Historical performance
Company summary
5G Networks Limited, a digital services company, provides cloud enabling solutions in Australia and New Zealand. The company offers data connectivity, cloud and data center, and managed services. It provides cloud-based solutions and network services; and operates fiber and wireless infrastructure, manages cloud computing environment, and operates data center facilities. In addition, the company engages in domain name registrations and renewals, website and email hosting, website development, search engine marketing, and social advertising campaigns for businesses. It serves small and medium businesses, enterprises, and wholesale and government customers. The company was formerly known as Webcentral Limited and changed its name to 5G Networks Limited in December 2023. 5G Networks Limited was incorporated in 1996 and is headquartered in Melbourne, Australia.
Historical performance
Stock information
Market capitalization: $50499604
Dividend yield: 0%
What ETFs track the telecommunication services sector?
Major funds that track the telecommunication services sector include:
Communication Services Select Sector SPDR ETF (XLC)
Fidelity MSCI Communication Services Index ETF (FCOM)
First Trust Indxx NextG ETF (NXTG)
iShares Global Telecom ETF (IXP)
iShares U.S. Telecommunications ETF (IYZ)
SPDR S&P Telecom ETF (XTL)
Vanguard Communication Services ETF (VOX)
Finder survey: Which industries do Australians hold stocks in?
Response
Telecommunication
27.54%
Source: Finder survey by Pure Profile of 1145 Australians, December 2023
How is the telecommunications sector performing?
The graph below tracks the performance of the Communication Services Select Sector SPDR ETF (XLC). Tracking the performance of ETFs is one way to monitor the overall trend of stock sectors.
Why invest in the telecommunication services sector?
The global economy relies on telecom services now more than ever before. This pushes telecom services into staple territory — a service that can remain in high demand, regardless of global, political or socioeconomic change.
As the telecom industry continues to rapidly evolve, Australian investors have the opportunity to get in on the ground floor with low-cap companies on an upward trajectory. Growth is an inherent part of this stock sector, and investors that select their securities wisely have the opportunity to turn a sizable profit.
What unique risks does the telecommunication services sector face?
Rapid technological change puts pressure on seasoned providers while promoting ferocious competition among startups. This sector is prone to volatility due to the fast-paced nature of the industry. There’s plenty of room for profit, but during a bear market, losses can be sizable.
How to evaluate telecommunication companies
Knowing how to assess telecommunications companies can help you understand which companies are succeeding and choose stocks more wisely. Metrics to evaluate include:
Size. Companies in this sector need to be large enough to weather the costs of service and network expansion. Low-cap stocks may be less expensive, but smaller companies are more likely to fold in an economic downturn.
Price-to-sales ratio. A company’s price-to-sales ratio compares its stock price to its revenues and can help Australian investors gauge how much other investors are willing to pay per dollar of sales for a particular stock.
Average revenue per user. Assess a company’s growth performance with its annual revenue per user: A calculation of a company’s total revenue divided by its number of active users. For telecom companies, this can help you assess mobile service providers and cable companies by tracking their revenue generated per user.
Churn rate. The churn rate is the rate at which customers terminate their service or abandon their provider for a competitor. A high churn rate means the company is likely experiencing difficulty retaining its user base.
Compare stock trading platforms
Compare brokerage accounts in Australia to find the right fit. Once you open an account, you can begin investing in stocks and ETFs.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Bottom line
The telecom sector offers investors the opportunity to back companies that facilitate global communications. While rapid growth is an attractive perk, Australian investors should be wary of losses during a down market. Review your brokerage account options across trading platforms for the account best suited to your investment needs.
Frequently asked questions
The S&P Telecom Select Industry Index tracks communications equipment providers, telecom services and wireless services.
Yes, many telecom stocks pay dividends.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies. See full bio
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