Hana: "Increase Telecom Equipment Stocks in November... Major Cycle Possible Next Year"

On November 7, Hana Securities recommended expanding investments in telecommunication equipment-related stocks, including optical communication and base stations, within November, citing the possibility of a major equipment cycle in 2026 as the United States announced plans for new frequency allocations. For the telecommunications services sector, the firm suggested postponing aggressive buying until the end of the year or the beginning of next year.

Kim Hongsik, a researcher at Hana Securities, stated in the report "Be Sure to Increase Telecom Equipment Stocks in November" that, "With a total of 800MHz scheduled for allocation by 2028, the frequency bands that can be commercialized immediately are expected to be auctioned first in the United States, the world’s largest market. This raises expectations for the entry into a major cycle for the telecommunication equipment sector."

Kim pointed out that the roughly 20% rise in the share prices of Ericsson and Nokia over the past month is also due to expectations for a surge in telecommunications equipment demand in the United States, which accounts for 25% of the global market, in 2026. The US Federal Communications Commission (FCC) has begun reviewing the auction of the Upper C-band (3.98-4.2GHz) frequencies. The FCC is expected to decide this month, through a vote, whether to auction off 180MHz of the Upper C-band frequencies (excluding 40MHz of adjacent frequencies from the total 220MHz between 3.98 and 4.2GHz).

Kim explained, "This announcement will be a major positive for telecom equipment stocks," adding, "The auction of the 3.98-4.2GHz frequency band, which could have been delayed until the summer of 2026 due to interference issues with aviation frequencies, is now expected to take place soon." He also noted, "With the US FCC announcing new frequency allocations, global system integrators are mentioning the possibility of transitioning to 5G standalone and introducing 5G Advanced in 2026," highlighting the potential for a major cycle in telecom equipment.

Amid increased volatility in telecom equipment stocks, some market participants have expressed concerns. However, Kim stated, "Based on past cases, it is inevitable that buying momentum for telecom equipment stocks will strengthen the closer we get to the first half of 2026," recommending, "Whenever share prices fall, continue to increase holdings in optical communication, base stations, in-building equipment, and quantum cryptography communication-related stocks."

He emphasized, "Looking at the 2018-2019 case, domestic frequency auctions were the trigger for telecom equipment stock price increases. In 2025-2026, US frequency auctions will play a decisive role in boosting domestic telecom equipment stock prices. Investors are aware that the US frequency auction will begin soon. Once we enter 2026, buying momentum for telecom equipment stocks is likely to intensify further."

Recommended stocks included RFHIC, KMW, Solid, Innowireless, RF Materials, ICTK, and Woorinet as leading companies in each sub-sector.

Currently, the telecommunications services sector is underperforming relative to KOSPI. Regarding the timing for buying into this sector, Kim advised, "Delay aggressive buying until the end of the year or the beginning of next year." He explained, "There is still uncertainty regarding hacking costs, and with management changes at KT and SK Telecom virtually confirmed, investors may be concerned about shifts in management strategy. With increased volatility in fourth-quarter earnings estimates for telecom companies and still weak confidence in strengthened shareholder return policies, it is too early for aggressive buying. It will not be too late to buy after both hacking and governance risks have been fully revealed."

For investment attractiveness by stock within the telecommunications services sector, he listed KT, LG Uplus, and SK Telecom in that order. He commented, "If telecom service stock prices rise, in the first half of 2026 it will likely be due to expectations for shareholder return policies and separate dividend taxation, and in the second half, to expectations for next-generation network adoption. Among them, long-term bottom-fishing in KT appears to have the highest probability of success."