It is hard to imagine life without modern communication tools. However, it was not too long ago when humans relied on horses and doves for quick communication. It is a very different world compared even to a couple of decades ago, the field has grown leaps and bounds even in this short time.
Both wired communication and wireless communication are key to the smooth running of the modern world. The modern communications industry can be broadly categorized into three divisions namely the carriers or telecom companies, infrastructure providers, and finally the service providers.
The carriers are the backbone of the industry and provide the bulk of the capital investment to maintain the constant pace of evolution in the communication protocols. Given the large barriers to entry, these are typically a handful of companies that control broad swathes of the market. Governments across the world also keep an eye on the consolidation in this Industry to avoid a monopoly situation. This phenomenon of a few companies covering large areas is not just in the developed markets but across the world. Examples are Vodafone and Deutsche Telecom in Europe, AT&T and Verizon in the US, SK Telecom in Korea and China Telecom in China, and Airtel in India. Many of these companies are involved in both wired and wireless communication, with the largest being NTT of Japan. 5G is the next generation of wireless communication protocol. It is expected that 5G connectivity could revolutionaries many areas including online education, streaming media, and AI and virtual reality-based applications.
The infrastructure providers include those that manufacture the equipment, semiconductor chips, build and operate towers, and those that offer last-mile connectivity. These companies provide components, hardware, and the infrastructure for the carriers to provide their services.
The service providers are the more diverse. These include various new social media outlets, streaming media companies, and certain community chat providers.
Let’s look at some of the top companies within each of the categories:
Verizon Communications, established in 2000, operates the largest wireless carrier in the US. The firm offers its services across the entire country and is currently working on rolling out its 5G network. The firm also provides internet services using both wireless technologies and fiber optic cables. Verizon generated over $129 billion in 2020 revenues.
Tracing its origin all the way back to 1878, AT&T is one of the largest telecommunications companies and operates the second-largest wireless carrier in the US. In addition to the telecom operations, AT&T also operates in media, entertainment, internet, and other services. The firm generated over $170 billion in 2020 revenues.
Based in the UK and having a global presence, Vodafone is one of the top players in the global telecommunication industry. Vodafone operates wireless networks in 22 countries and operates as a partner in over 45 other countries. Vodafone also operates mobile payment systems. Vodafone generated over $50 billion in 2020 revenues.
Infrastructure, Hardware, and components:
Based out of Houston, Texas, Crown Castle is one of the largest communication infrastructure managers in the world. The firm operates a shared communication infrastructure that includes over 40,000 cellular phone towers, and over 80,000 miles of fiber optic cable. Crown Castle generated over $5 billion in 2020 revenues.
Broadcom is a major designer and provider of semi-conductor and other solutions catering primarily to the telecommunications industry. The firm’s products are used across a wide variety of applications including data centers, signal processing systems, and communication optical. Broadcom’s 2020 revenues stood at over $23 billion.
Ericsson is a Swedish company that is an important provider of telecommunication equipment. The firms’ products include equipment for 3G, 4G, and 5G networks. The firm played a key role in the development of the 5G network protocols. Ericsson has offices across the world and owns over 55,000 patents.
Formerly known as Facebook, Meta is one of the largest communication services companies. It owns and operates multiple social media outfits including Facebook, Instagram, and WhatsApp. Meta is taking multiple initiatives to become an early mover and a top player in the next generation of the internet incorporating augmented and virtual reality.
Based out of San Francisco, Twitter operates the largest and the most popular microblogging site in the world. Twitter has over 330 million active users and is one of the most visited sites. The form has also faced several controversies and remains at the forefront of live news in politics and economics.
One of the first players in the streaming media business, Netflix remains a very popular player in this area. While the streaming media space has become crowded in recent months, Netflix has managed to stay abreast with several successful original productions and streaming rights to successful foreign shows. This includes the very popular ‘Squid Games’ recently.
A successor to the erstwhile Motorola corporation, Motorola Solutions provides multiple solutions including mission-critical communication services, command center software, video security & access control, and other support systems.
Investing directly in stocks is one of the ways of investing in the communications sector. However, with a large list of stocks to pick from, ETFs offer an easier and simpler method of investing in this space. Some of the popular ETFs in the telecom space include Vanguard Communication Services ETF (VOX), First Trust Indxx NextG ETF (NXTG), Fidelity MSCI Communication Services Index ETF (FCOM), iShares U.S. Telecommunications ETF (IYZ), iShares Global Comm Services ETF (IXP).
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