07. December 2020 | 09:27 CET
Telekom Austria, Upco International, PayPal: Pioneering spirit pays off in the long term
Industries are changing, and this change can be extremely lucrative for investors. Just think of the boring automotive sector and the success of Tesla and Co. Digital payment service providers, such as PayPal, are also much better off today than traditional banks. One industry that could benefit from a similar transformation by new players is telecommunications. Many small service providers or telephone companies have a scale problem despite ever-increasing networking—the reason: the classic business with telephony or SMS is eroding and shifting to the network. However, to be a full-fledged provider, telephone companies must continue to offer traditional solutions. That creates problems - even for the big players in the industry.
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ISIN: CA9152971052 , US70450Y1038 , AT0000720008
Telekom Austria: Declining revenues despite pandemic
For example, Telekom Austria has made losses with roaming offers in recent quarters; there were also adverse currency effects. Business with international telephony is delicate because the principle "volume is everything" applies here. Those who only make calls for a few minutes pay proportionately more. However, due to WhatsApp, Zoom and other apps, people today dial fewer and fewer numbers abroad.
The Telekom Austria share has been bobbing sideways for several months now. On a one-year horizon, the Company has posted a loss fitting in with the rather bleak outlook for the share. The Company itself expects revenues to fall by 2% in 2020 - mainly due to roaming losses and exchange rates in international business. The fact that a telecommunications Company such as Telekom Austria is not growing at a time of global lockdowns when there is a high need to communicate with friends and family is significant and shows that the industry is changing. The Austrian stock is justifiably not very popular.
Upco International: Micro-Cap with new ideas
The shares of the micro-cap Upco International are currently not causing any storms of enthusiasm - which is probably due to the low level of awareness of the title. Upco International has set itself the goal of offering small telecommunications providers a platform for acquiring roaming contingents and other classic telephony offers together with other partners on the market. This is intended to create synergy effects. In addition, Upco International operates as Fintech and has developed an app that enables worldwide payments, cost-effective telephony and other communications.
Upco International targets expats
With this, Upco International is targeting expat communities as customer groups. Recently, the Company made an additional purchase and acquired the niche provider Equinox from the Dominican Republic. The service is used by many exiled Dominicans living in the USA. Upco expects to gain new users for its app and telephony services from the acquisition. The acquisition is only a small part of the Company's vision of uniting several telecommunications providers under the umbrella of Upco International. The business model is still in its infancy. The share price has not yet picked up speed either and must be considered highly speculative. However, it is precisely this constellation that could prompt daring investors to get a foot in the door at Upco.
PayPal: Expansion in Asia and South America
Shareholders are already ideally positioned with PayPal. The Company recognized the weaknesses of traditional payment service providers early on and built its business model on this. Today, banks and retailers interact with the payment pioneers as a matter of course. For millions of people around the globe it is a given to use the service of PayPal when shopping on the net. In the meantime, the Company is also pushing into traditional floor trading. It is taking a similar approach to Upco, for example, partnerships in South America and Southeast Asia are intended to help win new customers for PayPal.
The share price increased by more than eighty percent last year and has also picked up speed in recent weeks. Although the valuation is ambitious, PayPal also has an excellent market position. The Company earned this position years ago when it recognized the shortcomings of established companies and put everything into uncomplicated payments on the net.