Hana: "Buy Telecommunications Equipment Stocks Before July 4... Spectrum Auction Tailwinds Expected"

There has been an analysis from the domestic securities industry suggesting that investors should buy telecommunications equipment stocks before July 4. This is due to the anticipated positive impact from the "One Big Beautiful Bill" being promoted by U.S. President Donald Trump, which is expected to bring favorable developments related to the U.S. spectrum auction. There is also a high likelihood that new spectrum auctions and investments will take place in Korea.

Kim Hongsik, a researcher at Hana Securities, stated in his weekly report titled "Buy Telecommunications Equipment Stocks Before July 4" on the 20th, "Past spectrum auctions have served as a barometer for predicting future earnings improvements and have played a decisive role in the rise of telecommunications equipment stocks. Now is the time to focus on telecommunications equipment stocks."

Kim pointed out that President Trump and the Republican Party are aiming to pass the bill before July 4, and noted, "With the sunset provision, the spectrum auction authority of the Federal Communications Commission (FCC), which was lost during the Joe Biden administration, is now highly likely to be restored until 2034. Additionally, the range of new spectrum auctions is likely to be set much wider, at 600?1200MHz, compared to the previously expected 220MHz."

Accordingly, it is expected that the FCC will likely announce a spectrum auction schedule immediately after the bill is passed. Kim predicted, "The spectrum auction will take place in the fall of 2025, and the spectrum owners will be determined no later than November." He explained, "Given this schedule, the share prices of domestic telecommunications equipment companies are likely to remain strong throughout the second half of this year. This is because, after the U.S. spectrum auction, it is clear that contracts will follow with Verizon, AT&T, or Samsung Electronics, Nokia, and Ericsson, and these results will be reflected in earnings in 2026."

Recently, the U.S. Department of Commerce made significant revisions to the rules for the government’s $37 billion Broadband Equity, Access, and Deployment (BEAD) program, which is also expected to benefit 5G telecommunications equipment companies. Kim noted, "For domestic telecommunications equipment companies, in addition to the network investments in the new 600MHz spectrum band by the four major U.S. telecom operators, additional benefits are expected from national network investments in the U.S." He added, "A cooperative system centered on U.S. telecom operators and public agencies is likely to be established, and the possibility of a large market opening in the U.S. in 2026 is increasing."

Kim also diagnosed that there is a possibility of resuming network investments in Korea. Referring to the proposed amendments to the Telecommunications Business Act following the KT network incident and the SK Telecom hacking incident, he said, "Domestic telecom operators are currently working on security measures. It is necessary to pay more attention to ICTK, the leading domestic quantum cryptography company, and, as in the U.S., we should keep open the possibility of resuming domestic network investments." He added, "There is also a high likelihood of new spectrum auctions and investments in Korea, raising expectations for the rise of domestic telecommunications equipment stocks."

Kim ranked the investment attractiveness of telecommunications service sector stocks in the following order: SK Telecom, LG Uplus, and KT. SK Telecom was considered the primary beneficiary of the dividend policy for companies with high payout ratios promoted by the Lee Jaemyung administration, especially since its share price had fallen excessively in the short term due to the recent hacking incident. As for LG Uplus, he noted its low PBR and PER, and emphasized that 1.6% of its treasury shares are scheduled to be canceled soon.

In addition, Kim cited RFHIC and KMW as the main beneficiaries among telecommunications equipment stocks, due to the allocation of the U.S. 600MHz wideband spectrum and the strengthening of restrictions on Chinese components. He also pointed to ICTK as the leading quantum cryptography stock in light of the growing importance of security issues.