Recent years, telecom companies being the best pick for most of the people. Mutual funds are competing to add telecom stocks to their portfolio by seeing the immediate profit possibility in it. Daily news’s on the requirements of Infrastructure growth in developing countries converting the telecom companies as a hot cake to investors. Is it really worth investing on telecom companies? In the past experience of investment loses by booming industries, what a value investor need to do now.
Telecom companies acting as real opportunities at present. But, no one able to say how long it will sustain. If you look into the telecom companies, the back side scenario will be worst than what is projecting in the front end. As all of us aware, retained earnings have huge role to play creating wealth to investors. Most of the best companie using retained earning to expand present business or hunt for new opportunity to add value to investors money. In this context we will have a look into the possibility of having retained earnings with telecom companies.If you look into the cash flow report of any telecom companies, you will amaze the amount using for investing activities. This is happening because of the regular changes required with laying infrastructure for infrastructure companies to operate. Cabling, machines, office equipments all required to have replaced time to time and the money flowing to such activity will be more compare with any other industry. In this context, telecom companies generally have very less cash in hand and will move to debt if there is any further expansion required. This will certainly pull down the price as well as value of the shares in the long run. Also, the space running with competitions and companies coming up with lots of offers and there is no monopolistic position available as an advantage for us. By considering this situations and the non availability of retained earning, it is better advisable to not move with telecom companies as a value investor.Welcome your thoughts on this article. Comment here once if you have any queries or doubts on this and I will rectify the same with return comment.