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In an era dominated by digital connectivity and technological advancements, India’s telecommunication sector plays a pivotal role in facilitating communication, data transmission, and emerging technologies like 5G.
According to Invest India, the nation’s telecommunication industry stands as the world’s second-largest, boasting a subscriber base of 1.17 billion as of September 2022. This encompasses both wireless and wireline subscribers. Moreover, it holds the position of the third-largest sector in terms of foreign direct investment (FDI) inflows into the country.
Furthermore, contributing to the expansion of India’s telecommunication market is the projection that the country is poised to emerge as the world’s second-largest smartphone market by 2025, as per GSMA. According to the latest GSMA report, the smartphone adoption rate in India was 77% in 2022.
5G services were introduced in select Indian cities in October 2022. GSMA also forecasted that 5G will account for over a third of total connections in India by 2030.
All in all, India’s telecom market is expected to grow from $44.3 bn in 2023 to $69.2 bn by 2028, at a CAGR OF 9.40%, informs Mordor Intelligence.
“The telecom sector in India is expanding due to increasing end-user applications and growth in markets like IoT, cloud, data centers, and 5G. The country is also witnessing an increase in internet consumption,” adds the market intelligence and advisory firm.
Government measures boosts India’s telecommunication industry
The expansion of India’s telecommunication sector is facilitated by supportive government measures. In the 2023 union budget, a sum of Rs 97,579.05 crore ($11.71 bn) was allocated for the Department of Telecom.
Additionally, the government has introduced the Production Linked Incentive (PLI) Scheme, amounting to Rs 12,195 crore ($1.46 bn), to encourage the manufacturing of telecom and networking products.
Meanwhile, the government has taken steps to accelerate India’s readiness for 5G. The country is poised to establish 100 laboratories within engineering institutions dedicated to the development of applications utilising 5G services.
“The labs will cover, among others, applications such as smart classrooms, precision farming, intelligent transport systems, and healthcare applications,” said Indian Finance Minister Nirmala Sitharaman in her budget speech earlier this year.
The government’s BharatNet project aims to deliver broadband connectivity to rural regions, specifically focusing on more than 2.5 lakh gram panchayats (village councils) throughout the nation.
Besides, in 2021, large-scale structural and procedural reforms were brought in to enhance liquidity and minimise financial stress within the South Asian nation’s telecom market.
While these measures signify a positive trajectory for India’s telecommunication industry, challenges persist. Experts believe that intense competition leading to price wars, financial stress on telecom companies, and infrastructure gaps in rural areas are hurdles that require strategic solutions.
How to invest in India’s telecommunication industry?
As India’s telecommunication industry embraces innovative technologies and demonstrates strong growth, here is a compilation of three stocks for investors to look into.
Bharti Airtel
Bharti Airtel is a leading telecom company based in India’s New Delhi. It operates in 20 countries across Asia and Africa. The company provides telecommunications, tower infrastructure, and digital television services.
In the fiscal year ended March 2023, Bharti Airtel’s revenues spiked by 19% year-on-year to Rs 1391.45 bn ($16.69 bn). During the same period, its net profit rose by 96% year-on-year to Rs 83.46 bn ($1 bn).
The company’s stocks are listed on the National Stock Exchange of India (NSE: BHARTIARTL) and the Bombay Stock Exchange (BOM: 532454). Bharti Airtel has a market capitalisation of $68.64 bn. The company’s stock has fallen by 13.21% in the past year. It has a PE ratio of 71.40 and a price-to-book ratio of 7.35.
“From a long-term perspective, we believe Bharti Airtel would continue to gain market share, backed by the highest penetrations, and with minimum Capex requirements. With a stronger digital portfolio supported by rising per-user data, we are positive about the future growth of Airtel,” says Axis Securities.
Indus Towers
Indus Towers Limited is India’s leading provider of passive telecom infrastructure, deploying, owning, and managing over 200,000 towers and 347,879 co-locations as of June 2023. The company’s infrastructure services play a crucial role in supporting telecommunications networks for major operators like Reliance Jio, MTNL, and BSNL.
The company registered a 2% year-on-year rise in revenue, amounting to Rs ₹28,382 crore ($3.40 bn) for the fiscal year ended March 2023. During the same period, its profit after tax fell by 68% year-on-year to Rs 2,040 crore ($244.82 mn).
Stocks of Indus towers are listed on the Bombay Stock Exchange (BOM: 534816) and the National Stock Exchange of India (NSE: INDUSTOWER). The company has a market cap of $6.22 bn. Since last year, the company’s shares have fallen by 5.16%. Along with that, Indus shares have a PE ratio of 15.29 and a price-to-book ratio of 2.12.
Tata Communications
Tata Communications is a prominent telecom company specialising in powering hyper-connected ecosystems. As a digital ecosystem enabler, it facilitates the digital transformation of enterprises in India’s growing digital economy.
In the fiscal year ended March 2023, the company saw a 6.66% increase in income from operations to Rs 16724.73 crore ($2.01 bn). During the same period, profits amounted to Rs 1800.87 crore ($216.12 mn), a 21.30% year-on-year increase.
The company has a market cap of $5.89 bn and is traded on the Bombay Stock Exchange (BOM: 500483) and the National Stock Exchange of India (NSE: TATACOMM). The company’s shares have risen by 30.64% since last year. It has a PE ratio of 36.83 and a price-to-book ratio of 33.45.
Editor’s note: All stock movement figures as of November 20, 2023.
