The Canadian telecommunications industry is an oligopoly, which means that only a few companies operate in the market. The Big Three, made up of AEC, Rogers Communications, and TELUS (TSX: T) (NYSE: TU), are the dominant players. Likewise, these are the best choices if you are looking for 5G stock.
However, if you want to create a combination of telecommunications and technology for revenue and growth, TELUS should be the logical choice on the telecommunications side. On the technical side, the best supplement is TELUS International (TSX: TIXT) (NYSE: TIXT). Even though TELUS owns 65% of TELUS International, you should consider the companies separately.
TELUS is a giant in the country’s telecommunications industry with its market capitalization of $ 37.62 billion (second behind ECB). It generates approximately $ 14.4 billion in annual revenue. The customer base for its wide range of products and services is over $ 13 million.
Management has spent more than $ 175 billion on infrastructure and upgrades since 2000. Total investments could reach $ 215 billion, as TELUS prepares to add $ 40 billion over the next three years. Since 2013, TELUS has been laying the foundation for the 5G network since 2013. Investments in advanced mobile networks and Fiber to the Home technologies have grown at a rapid rate.
TELUS expects fierce competition from the big guys with the rollout of 5G. Rogers awaits regulatory approval to acquire Shaw Communications. Nonetheless, current investors are happy with the stock’s performance so far in 2021 and over the past two decades. The gain since the start of the year is 12.72%, while the total return over the past 20 years is 776.26% (11.45% CAGR).
While operating income increased by 8.9% in the first quarter of 2020 (quarter ended March 31, 2021) compared to the first quarter of 2020, net income decreased by 5.7%. This decrease is explained by the increase in operating expenses. Nonetheless, the net customer additions have been very impressive. Darren Entwistle, President and CEO of TELUS, said the company’s highly differentiated and powerful asset mix is moving towards high growth, technology-driven verticals.
Solutions for the digital world
The core business of TELUS International or TIXT is quite different, although it perfectly complements the telecommunications giant. This $ 9.52 billion company provides tailor-made solutions for the digital world. TIXT caters to industries such as financial technology and financial services, communications and media, healthcare, e-commerce, travel and hospitality.
TIXT just made its successful market debut in February 2021 but has yet to gain momentum. Nonetheless, the IPO was a historic milestone as it was TSX’s largest tech IPO. Darren Entwistle said TIXT has been a pillar of TELUS ‘aggressive growth strategy and that the path to future growth has only just begun.
The results for Q1 2021 (three months ended March 31, 2021) compared to Q1 2020 are very encouraging. TIXT revenue increased 57% due to robust double-digit organic growth and contributions from recent acquisitions. The most notable figure is the 90% growth in Adjusted EBITDA. Currently, the price of this promising tech stock is $ 35.87, with a potential return of 23.27% over the next 12 months based on analyst forecasts.
TELUS and TELUS International could be the ideal combination for investors seeking income and growth. Dividends from the resilient telecommunications company will provide sustainable income, while tech stocks will generate massive capital gains. It’s rare that you find a combination as good as this.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
Foolish contributor Christopher Liew has no position on any of the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV and TELUS CORPORATION.