Three Communication Services Stocks Positioned to Defy Market Headwinds

While the diversified communication services sector faces a perfect storm of challenges—from hefty 5G infrastructure investments and volatile raw material costs to geopolitical tensions and supply-chain bottlenecks—three stocks stand out as potential winners for those willing to look past near-term headwinds.

Telenor, Telecom Italia, and VEON emerge as the most compelling plays in this space, each benefiting from accelerating fiber deployment and the exploding demand for scalable connectivity solutions driven by IoT expansion and cloud migration.

Why Communication Services Stocks Are Worth a Second Look

The Zacks Diversified Communication Services industry, ranked #184 out of 250+ sectors, carries a bearish short-term outlook. This pessimism has crushed valuations—the sector trades at just 11.93X trailing 12-month EV/EBITDA, well below the S&P 500’s 17.79X and the broader Utilities sector’s 14.98X multiple.

Over the past year, the industry barely inched up 0.7%, dramatically trailing the S&P 500’s 21.1% gain and the Utilities sector’s 6.3% climb. Yet this valuation disconnect and sector apathy create opportunity.

The core culprit? Massive capital expenditures for 5G network overhauls, combined with structural headwinds: persistent chip shortages, soaring equipment costs from inflation and sanctions, and customers defecting to cheaper alternatives. Meanwhile, legacy voice services continue eroding as users migrate to IP-based platforms and wireless substitution accelerates.

The Long-Term Growth Thesis

Here’s where patient investors should perk up: the industry is actively pivoting toward higher-margin services. Telecom carriers are increasingly bundling customized voice, data, and technology solutions for small and mid-sized businesses (SMBs), tailoring offerings to individual needs while subsidizing services for low-income households to build market share.

The massive infrastructure investments in LTE, broadband, and fiber networks—while pressuring near-term profits—position these carriers as technology powerhouses equipped to handle surging video consumption, bandwidth-intensive applications, and the explosive growth of connected devices.

This is where the three communication services stocks enter the picture.

Telenor ASA (TELNY): The Asia Catalyst

Telenor, the Norway-based telecom giant, recently completed a transformative $15 billion merger with Axiata Group, establishing itself as a leading provider in Malaysia’s rapidly digitizing economy. The deal is expected to significantly boost the company’s growth trajectory in Southeast Asia.

The momentum is evident in Wall Street’s revisions: earnings estimates for the current year have jumped 14.1% to $0.89 per share since September 2024, while next-year estimates are up 19.1% to $1.06. The stock has delivered a solid 34.2% return over the past 12 months and carries a Zacks Rank #2 (Buy).

Telecom Italia S.p.A. (TIIAY): The Turnaround Story

Telecom Italia has quietly staged an impressive recovery. The Rome-based carrier—which holds a controlling stake in TIM Brazil—is stabilizing its domestic business through aggressive cost reductions and pricing discipline.

The earnings surprise factor is staggering: current-year estimates have rocketed up 188.9% to $0.08 per share since September 2024, while next-year expectations soared 612.5% to $0.57 per share. The stock has rocketed 101% over the past year, boasting a Zacks Rank #2 and a VGM Score of B. This combination of dramatic valuation recovery and improving fundamentals makes it a compelling contrarian play.

VEON Ltd. (VEON): Emerging Markets Exposure

VEON, headquartered in Amsterdam, operates across ten emerging markets including Russia, Pakistan, Algeria, Uzbekistan, Ukraine, Bangladesh, Kazakhstan, Kyrgyzstan, and Georgia—some of the world’s fastest-growing telecom markets. The company is doubling down on digital capabilities and technology-driven services to transform lifestyles across these regions.

Earnings momentum is accelerating: the Zacks Consensus Estimate for current-year earnings has surged 112% since June 2025. The stock has gained an impressive 112.6% over the past year, carries a Zacks Rank #2, and sports a VGM Score of B. For investors seeking emerging-market exposure through a communication services stock, VEON offers compelling geographic diversification.

The Bottom Line

These three communication services stocks are primed to outperform as the industry’s painful infrastructure transition bears fruit. While the sector as a whole remains unloved—trading at attractive valuations and lagging broader indices—Telenor, Telecom Italia, and VEON benefit from specific catalysts: transformative M&A, domestic stabilization, and emerging-market growth potential.

The rating consensus is clear: all three stocks carry Zacks Rank #2 recommendations, signaling institutional confidence despite industry-wide skepticism. For contrarian investors willing to stake a position before the market reprices communication services stocks, the risk-reward setup is increasingly attractive.