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27. October 2020 | 09:50 CET

Deutsche Telekom, Freenet, Upco International: Where telecommunications creates returns

  • Telecommunications
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If investors were looking for high returns a little more than twenty years ago, they often found them in telecommunications stocks. In addition to the big network operators, such as Deutsche Telekom and Vodafone, the mobile phone stocks of the first hour, such as Nokia and Ericsson, also caused euphoria among investors. The telecommunications sector has become uninteresting for investors. This does not mean telecommunication shares do not play a vital role in the portfolios of investors or that they can even increase the yield noticeably as a speculative addition.

time to read: 3 minutes by Nico Popp



Nico Popp

At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

About the author

Deutsche Telekom: Solid, without surprises

A stock that is more of a conservative investment is the stock of Deutsche Telekom. Germany remains the core market for the telecommunication giant. Still, the Company also is active in the rest of Europe and the USA. Deutsche Telekom's current valuation is more than EUR 70 billion. The U.S. business, in particular, has been developing well and was further strengthened some time ago by the acquisition of Sprint. Deutsche Telekom has long recognised that size is everything in the telecommunications market and is acting accordingly. Meanwhile, there are always problems with organic growth and weak figures.

But given the setbacks in many other industries, Deutsche Telekom is considered stable. The latest quarterly figures are positive and have been received well by the market. The pandemic has hardly affected the Company at all. The share has been moving sideways for many months but offers a stable dividend yield of around 4%. As the Company is on a positive path in the USA and should even benefit from the pandemic, the share is an alternative for conservative investors. However, investors should not expect big surprises.

Freenet: Don't be dazzled by the dividend

The Freenet share is also a timeless dividend investment. The Company focuses more on mobile communications and mobile Internet and currently promises investors a dividend yield of around 9%. Freenet shows that such payout levels often have a catch: The figures for the first half of 2020 were slightly mixed. That in itself would not be a problem, but the Company is said to be in debt.

Only recently, the Swiss subsidiary Sunrise was sold, and Freenet put part of the proceeds into its balance sheet - unrestricted growth looks different. Although the stock is undervalued, Freenet gives the impression of a value trap. The competition is fierce, and Freenet itself has little to offer that is suitable as a unique selling point.

Consolidation as the key to a billion-dollar market

The young Canadian Company Upco International is taking a completely different path from the thick ships of the industry. The Company is competing to profit from the increasing competition and price war in the mobile phone market. Over the past 15 years, data services have ensured that sales of traditional telecommunications services have been steadily declining. Today, for example, many people communicate via WhatsApp and no longer write text messages (SMS). The use of classic telephony is less and less common. This development is becoming a burden for smaller telecommunications providers: Costs are rising and getting relevant, especially for these small Companies. Upco has set itself the goal of offering these small providers a platform for outsourcing certain telecommunications services. Synergies are created when the volumes of several smaller Companies come together, says Upco International. The providers can then concentrate on their core business.

In addition to the wholesale telecom business, which is benefiting from the growing cost pressure in the industry, Upco also offers digital services. These include a payment service that works with existing bank accounts and is designed to enable real-time payments. Compared to existing competitors, Upco sees cost advantages as well as an exceptionally high level of security.

Over the next three years, the Company plans to continue its growth path and to achieve substantial growth in both wholesale telecom and digital services. The Company sees excellent opportunities in the former area in particular, as the shrinking market for classic telecommunications services remains essential for providers with continued high market volume. The platform offered by Upco International is expected to gain market share rapidly.

Upco International: Telecom visionary stands at the very beginning

While classic telecommunication shares are rather conservative investments, Upco International's shares are the opposite: the market capitalisation is currently only EUR 2 million. Given this valuation, the share must be considered highly speculative. With the management team's experience in the telecom sector and Upco International's clear vision, investors can keep an eye on the stock. There is no doubt that the Company is at the beginning of its development.


Nico Popp

At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

About the author

Conflict of interest & risk note

In accordance with §34b WpHG we would like to point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH may hold long or short positions in the aforementioned companies and that there may therefore be a conflict of interest. Apaton Finance GmbH may have a paid contractual relationship with the company, which is reported on in the context of the Apaton Finance GmbH Internet offer as well as in the social media, on partner sites or in e-mail messages. Further details can be found in our Conflict of Interest & Risk Disclosure.

Related comments:

26. November 2020 | 08:42 CET | by André Will-Laudien

Deutsche Telekom, Tencent, Upco International – it used to roar!

  • Telecommunications

We are currently in the early stages of 5G rollout, with a focus on developing new features and increasing network performance. It's easy to get caught up in the 5G hype, and rightly so: the benefits that 5G can offer to several technology sectors are enormous. The industry speaks in this context of the age 4.0 or IOT, meaning "internet of things" - i.e. the total networking of production with all its suppliers and customers in real-time categories. Everything is traceable, controlled and validated online - accounting is entirely automatic. However, there are still unanswered questions about the health effects of high-performance networks on people, which nobody really knows how to answer. Until we have reached a nationwide expansion stage in Germany, LTE users will continue to make up the vast majority of the operators' subscriber base and continue to generate substantial revenues. The last mile of digitization is still to come, a clear sign of a misguided industry policy.


09. November 2020 | 11:08 CET | by André Will-Laudien

Vodafone, UPCO International, Apple: Phone, Pay, Chat!

  • Telecommunications

Telecommunication today is an inexpensive service that we take for granted. In the past, however, international calling was an exciting affair. I can still remember the time before the mobile telephone. It was 1990, in Death Valley, United States with a temperature of almost 50 degrees, there was a Pacific Bell coin-operated telephone which only accepted quarters (US 25 cent coins). When dialling a German number, the operator said: "Please insert USD 4.75 to proceed with this call." Prepared for this, with 19 quarters, one would insert the coins and wait under the plexiglass hood for the connection. One congratulated a family member on their birthday or exchanged a brief update on a vacation and then after 1 minute 30 seconds the call would end. At the very least, the relatives 9,100 km away had received a sign of life. All is well!


14. January 2020 | 08:11 CET | by Mario Hose

Deutsche Telekom & Co with 5G challenge - Will Philion benefit in 2020?

  • Telecommunications

5G is not only a major challenge for Deutsche Telekom. All German network operators have to cope with the high investments required for the next generation mobile communications standard. They are still busy working on the 4G LTE standard. One example is the recent announcement that Telefonica Deutschland is not meeting its obligations for 4G network rollout. Only those who can ensure high network utilization will earn money. To achieve this, no network operator can avoid independent mobile service providers like Philion SE. The still young listed company has repositioned itself with the takeover of at the end of 2019. Profitable growth is expected to begin in 2020. There are good reasons why the small-cap stock could take off in 2020.