The COVID-19 pandemic has given an entirely new perception for the growth in some sectors of the financial market, particularly telecommunications. During the lockdown, the telecom sector (“telcos”) has played a life-saving role for the companies. To carry on with their respective functions, all the companies are solely dependent on digital tools and network offerings during lockdown- without an iota of doubt, this triggered the demand for telecom services. Given the current situation, communication services demand more than ever, Telcom is making constant changes in favor of customers. This surge in demand put forward a set of challenges for the telecom industry and resulted in lower telecom stock prices. 

Since COVID-19 is still ramping up, all investors need to gain insight into the telecom sector before making any investment. This article will help you with the nitty-gritty of the telecom industry in a nutshell and the impact of the pandemic on telecom stock prices. If you are more inclined towards the telecom sector, but current challenges are stopping you from doing so, then remember- “Although telcos are facing challenges right now, it will bounce back with more strength and leveraging opportunities in the coming future.”

Overview Of Telecom Sector

With limited knowledge of the telecom sector, most people think of it as call centers. Although call centers are a prominent part of this sector, several other businesses and regulatory authorities are also part of the telecom sector. 

All the companies that offer the necessary services and infrastructure for transmitting signals, messages, and data comprise the telecom sector. Among all, the internet and telephony services are the major contributors to the telecom stock prices. This sector provides a linkage that helps us stay connected via signals and message transmission in layman’s language. 

Impacts of COVID-19 On Telecom Sector

1. Network Usage and Connectivity

Sources indicate that network usage and its traffic is skyrocketing. The internet and other digital tools in the lockdown have seen a 10 percent rise. The work-from-home culture during the pandemic resulted in considerably higher demand for the internet than usual. Consequently, the connection rate & the quality of services started deteriorating as the telecom sector was not ready to handle this overwhelming demand at once. And not to mention, the telecom stock prices showed the impact within the financial market.

2. Shift In The Preference Of Customers

The Telecom sector witnessed a significant shift in the consumption pattern of the customers. Everything shifted from offline to online mode during the lockdown & the telecom sector had to revisit their offering, updating it with digital tools like webinars, videoconferencing, conference calls, online studies, etc. 

To combat the change, the companies in this sector start to focus more on improving the customer experience by providing promotional offers, anonymized data, and services at a lesser cost. With this, the constraints of the supply chain harm the sector.

3. Data Usage To Track The Virus

Government organizations have been making enormous use of the telecom sector’s data specifically to keep a watch on the virus. Most countries are likely to use secular data for this purpose - this questions the privacy of the data in the foreseeable future. It is one of the reasons for the downfall of the sector and lower telecom stock prices.  

4. Financial Impact

Although telecom is one of the sectors that recessions have less hit in the past, the pandemic resulted in cash flow problems in the long term. The cancellation of the sports leagues poorly impacted the revenue generated by the telecom companies. In such a situation, the investment in 5G was pulled out to meet the rising demand. This shook the whole sector, and the telecom stock prices decreased tremendously. 

Current Trends Of Telecom Sector

The telecom industry is one of the most crucial and profitable sectors of the stock market. But the COVID-19 pandemic has raised considerable challenges for telecommunication service providers. With a large proportion of the workforce sitting at home and working remotely, it becomes essential for the sector to shift its load to the private network without increasing the revenue. It is tough to anticipate the full impact of the coronavirus outburst on the telecom stock prices or the sector as a whole. However, what is clear is that the industry got impacted and showed a significant decline in revenue growth and telecom stock prices. 

In terms of sectoral brands, the industry is made up of various large and small players from all across the world. In the U.S. telecom industry, the three major players are AT&T, Verizon, and T-Mobile U.S. Between 2008 to 2019, these three companies provided the highest operating revenue in the country. But the income fell in 2020. 

AT&T is the top player among the three. Over the last few years, the company added $20.7 billion to its revenue, resulting in $181.2 billion in 2019. However, the revenue generation in 2020 decreased to $171.76 billion, which resulted in lower telecom stock prices.

Future Of The Telecom Sector 

As an impact of the global pandemic, the telecom sector was less successful and experienced a decline in telecom stock prices. The global spending on this sector also contracted from 2019 to 2020. But, a Statista report showed a ray of positivity to the sector in the foreseeable future. The spending in the industry is projected to grow as we move towards 2024. With a decrease in telecom spending by 1.4% in 2020, it is forecasted that it will start growing from 2021 onwards. Experts say that the telecom sector will witness a growth of 1% in 2021 with a subsequent surge of 0.6% in 2022. The rise in spending in the telecom sector indicates the development of the telecom sector and excellent telecom sector stock prices in the coming future.