Theres going to be a lot of new tellies bought over the Christmas period and in the New Year sales, and people will be thinking about new TV packages soon after. Well see a lot of new fancy phones being bought too, and theyll be making new demands on bandwidth.
With the lines between telecoms services and provision of content increasingly blurring, whos going to win the most eyeballs in 2015 and which will be the best investment?
I think BT Group (LSE: BT-A) (NYSE: BT.US) has the edge, and Ill tell you why.
Its largely down to bandwidth, and BTs fibre network has been expanding at a cracking pace by the end of the first half in September, it already reached 21 million premises, and BT said it was seeing strong demand for higher-capacity connections.
Thats what makes BTs TV channels possible, and it looks set for another year of successful uptake of its BT Sport offering, with average Premier League audiences already up 45% at the halfway stage.
BT shares have shot up 15% over the past month, to 418p, but theyre still on an undemanding P/E of 14 with a dividend yield of 3% on the cards, improving to 13.5 and 3.4% for 2015 and theres a very big Strong Buy consensus from analysts right now.
Weaker growth potential
Shares in SKY (LSE: SKY) are up nicely over the past month too, to 942p. But theyre on a higher P/E of more than 16, and June 2015 looks set to bring us the second year in a row with no growth in earnings per share (EPS). And though SKY has a much bigger TV audience, its under increasing margin pressure as it has to compete with more providers offering the same content.
Analysts are more bearish too, with an even split between Buy and Sell ratings. And while SKY is probably still a reasonable investment, I just dont see the same medium-term upside as I do with BT.
And that brings me to Vodafone (LSE: VOD) (NASDAQ: VOD.US), whose valuation looks pretty stretched. At 230p the shares have also enjoyed a late surge this year, but theyre on P/E multiples of 36 and 34 for March 2015 and 2016 respectively.
Vodafones 4G network is surely going to bring in some decent earnings in due course, but its still early days yet and with service revenues falling in developed markets, theres a 60% drop in EPS predicted. Forecast dividends are high at around 5%, but theyd be little more than half covered by earnings. For the next few years, I really cant see where Vodafone is going.
Theres clearly a massive recovery in EPS factored into the Vodafone share price today, or theres a big takeover premium, or something but at todays price, Im just not buying it.
Good telecoms shares like BT Group must feature in many a millionaire’s portfolio. And with a sensible long-term approach, you could join them!
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