As the economy becomes more globalized and wealth increases in developing nations, you would assume that more and more people would have access to Internet and wireless networks. And you would be correct: In the past decade, mobile penetration in Africa has increased from one in 50 people to more than one-quarter of the population. Yet Africa's penetration rate -- the percentage of the population that has access to wireless -- is only 28%, compared with about 80% in the Americas.
This means that telecom companies have plenty of growth opportunities -- not only in Africa, but in Eastern Europe and parts of Latin America as well. And by and large, foreign telecoms have done well for investors. For instance, over the past five years, exchange-traded funds like the iShares S&P Global Telecommunications have been able to outperform the broad index by more than 10% and the world index by about 5%.
However, troubles in the European Union, an anemic recovery in the U.S., and a slowdown in China have brought the markets to a standstill as investors worry about the possibility of a double-dip recession.
Could this be a buying opportunity for a sector that has otherwise performed well and that still has plenty of opportunities abroad? To find out, I ran a screen for foreign telecoms whose shares have plunged over the past three months, that have P/Es of less than 15, and that have a four- or five-star ranking in our 165,000-strong Motley Fool CAPS community. Here are the results:
|
Company
|
3-Month %
Price Change
|
Price-to-Earnings
Ratio
|
CAPS Rating
(out of 5)
|
|
France Telecom (NYSE: FTE )
|
(22.5%)
|
13.2
|
*****
|
|
Telecom Italia (NYSE: TI )
|
(20.1%)
|
10.2
|
****
|
|
Telefonica (NYSE: TEF )
|
(18.1%)
|
9.1
|
****
|
|
Turkcell Illetisim Hizmetleri (NYSE: TKC )
|
(14.7%)
|
11.3
|
*****
|
|
America Movil (NYSE: AMX )
|
(6.7%)
|
13.3
|
*****
|
Sources: Motley Fool CAPS and Google Finance.
Of course, it's understandable that some of these companies have taken a big hit. Telefonica, despite having significant exposure to Latin America, generates about 35% of its revenues from its home market of Spain. Telecom Italia does about 80% of its sales in Italy -- and both Spain and Italy are part of the dreaded PIIGS group that faces huge deficits and stagnant growth.
Turkcell reported a 7% increase in revenue for the first quarter of 2010, continues to invest in its 3G network, and pays investors a fat 4.6% dividend. Similarly, France Telecom pays a juicy 4.7% dividend.
But keeping things in context, what about U.S. players like Verizon (NYSE: VZ ) or AT&T (NYSE: T ) ? Although neither company has international exposure to brag about, both pay extraordinarily high dividends and are trading for less than 12 times next year's earnings. Sure, rapid-growth years are behind these companies, but there's much to be said for stability and quarterly cash payments.
What would you rather own -- a U.S. telecom or a foreign wireless provider? Sound off in the comments box below or head over to CAPS and let us know what you think about the companies listed above.
RSS Headlines
Fool UK