Remote work, home sheltering, store closures, supply-chain disruptions and declining ad expenditures among largest drivers
MUFG, The coronavirus pandemic is affecting the revenue streams of technology and telecommunications companies in divergent ways, leading some to adopt new business models, according to the TMT (or tech, media and telecom) banking team at Mitsubishi UFJ Financial Group (MUFG).
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Ari Bensinger, MUFG’s Head of U.S. Strategic Research for TMT, says that while COVID-19 adds a layer of uncertainty over the short- and medium-term outlook of many tech and telecom companies, secular trends for the overall sector remain favorable in the long term. He cites rapidly rising wireline (cable-based) and wireless data traffic—as well as growing demand for semiconductors for use in electronic goods—as strong underlying growth drivers.
The beneficiaries of remote work, remote learning and home sheltering
Mr. Bensinger says the need for remote work and learning capabilities has fueled substantial growth in the use of Internet servers, cloud-based applications, online communication tools, and telecommunication infrastructure. He adds that this trend has benefited manufacturers, developers and providers of related hardware, software and services, including data-center companies that operate and manage server hubs; developers of videoconferencing, online collaboration and messaging applications; and telecom companies.
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“Telecom services, in particular, are indispensable for businesses and individuals during this time, and they have made the sector highly resilient,” Mr. Bensinger adds. “At the same time, more usage demands more network capacity, which may require additional capital expenditures by telecom companies to augment their infrastructure in order to maintain service quality—whether in cellular phone service or broadband speed. These expenditures may be offset in the longer run by price increases, or by higher revenue from consumer migration to costlier service plans that cover more data consumption, usage time and faster connections.”
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