Telecom Stocks As A Growth-Recovery Play Is Gaining Popularity

A Citi survey shows that owning telecom stocks as a growth-recovery play is gaining popularity.

"Based on our recent buy-side survey, 56% of investors identified a single leading investment story in telecoms, 16% do not see telecoms as appealing under their current structure and 27% see company-specific stories only," analyst Dalibor Vavruska wrote in a note.

The analyst noted that considering only the top four stories (utility/dividend, growth recovery, efficiency & consolidation and regulatory improvements), 36 percent of investors saw growth recovery as the leading story, up from 8 percent in autumn 2014.

Meanwhile, the utility/dividend and efficiency gains and consolidation stories remain popular, but less so than in 2014 amid "already ultra-low interest rates, often unstable free cash flows, new pure infrastructure investment options and regulatory constraints."

In addition, only 4 percent of respondents see regulatory improvement as the main story.

Vavruska noted that the survey implies that telecoms need to better monetize bandwidth demand growth to meet investor expectations and avoid future vulnerability. However, current structural/regulatory framework may not guarantee such a move.

"The question therefore remains: will growth recovery help to sustain the industry in its current form or will growth disappointment possibly invoke more volatility, disruption and ultimately make structural change a global phenomenon?" Vavruska added.