NEW YORK, June 12, 2020 /PRNewswire/ -- The coronavirus pandemic is affecting the revenue streams of technology and telecommunications companies in divergent ways, leading some to adopt new business models, according to the TMT (or tech, media and telecom) banking team at Mitsubishi UFJ Financial Group (MUFG).
Ari Bensinger, MUFG's Head of U.S. Strategic Research for TMT, says that while COVID-19 adds a layer of uncertainty over the short- and medium-term outlook of many tech and telecom companies, secular trends for the overall sector remain favorable in the long term. He cites rapidly rising wireline (cable-based) and wireless data traffic—as well as growing demand for semiconductors for use in electronic goods—as strong underlying growth drivers.
The beneficiaries of remote work, remote learning and home sheltering
Mr. Bensinger says the need for remote work and learning capabilities has fueled substantial growth in the use of Internet servers, cloud-based applications, online communication tools, and telecommunication infrastructure. He adds that this trend has benefited manufacturers, developers and providers of related hardware, software and services, including data-center companies that operate and manage server hubs; developers of videoconferencing, online collaboration and messaging applications; and telecom companies.
"Telecom services, in particular, are indispensable for businesses and individuals during this time, and they have made the sector highly resilient," Mr. Bensinger adds. "At the same time, more usage demands more network capacity, which may require additional capital expenditures by telecom companies to augment their infrastructure in order to maintain service quality—whether in cellular phone service or broadband speed. These expenditures may be offset in the longer run by price increases, or by higher revenue from consumer migration to costlier service plans that cover more data consumption, usage time and faster connections."
He says home sheltering and lockdowns have favored e-commerce companies, which have experienced considerable growth by offering online alternatives to buying and selling goods in lieu of brick-and-mortal retail.
Other effects on hardware manufacturers
Mr. Bensinger list the pandemic's impact on a range of hardware technology producers:
The effect on Internet companies
Internet companies that derive their main income from advertising have been negatively affected by the pandemic, says Mr. Bensinger. "Four of the largest online advertisers include the retail, auto, travel and entertainment industries—and all of them took a hit in consumer demand that has squeezed their ad budgets," he notes. "This setback has, in turn, led to declining ad revenue among and Internet companies such as search engines and social-media networks, as well as sites and mobile-app developers that publish crowd-sourced reviews about businesses and operate online reservation services."
Mr. Bensinger adds that some of the largest Internet companies are diversified enough to withstand the downturn in ad revenue, and perhaps even thrive by offering other services, but that the knock-on effect of declining ad expenditures is felt across the board.
MUFG is one of the world's largest financial institutions by assets, with approximately $3.1 trillion.1
About MUFG Americas
The U.S. operations of Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world's leading financial groups, has total assets of $393.3 billion at March 31, 2020. As part of that total, MUFG Americas Holdings Corporation (MUAH), a financial holding company, bank holding company and intermediate holding company, has total assets of $165.7 billion at March 31, 2020. MUAH's main subsidiaries are MUFG Union Bank, N.A. and MUFG Securities Americas Inc. MUFG Union Bank, N.A. provides a wide range of financial services to consumers, small businesses, middle-market companies, and major corporations. As of March 31, 2020, MUFG Union Bank, N.A. operated 348 branches, consisting primarily of retail banking branches in the West Coast states, along with commercial branches in Texas, Illinois, New York and Georgia. MUFG Securities Americas Inc. is a registered securities broker-dealer which engages in capital markets origination transactions, domestic and foreign debt and equities securities transactions, private placements, collateralized financings, and securities borrowing and lending transactions. MUAH is owned by MUFG Bank, Ltd. and Mitsubishi UFJ Financial Group, Inc. MUFG Bank, Ltd., a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc., has offices in Argentina, Brazil, Chile, Colombia, Peru, Mexico, and Canada.
Mitsubishi UFJ Financial Group, Inc. (MUFG) is one of the world's leading financial groups. Headquartered in Tokyo and with more than 360 years of history, MUFG has a global network with over 2,700 locations in more than 50 countries. The Group has over 180,000 employees and offers services including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing. The Group aims to "be the world's most trusted financial group" through close collaboration among our operating companies and flexibly respond to all of the financial needs of our customers, serving society, and fostering shared and sustainable growth for a better world. MUFG's shares trade on the Tokyo, Nagoya, and New York stock exchanges. For more information, visit https://www.mufg.jp/english.
1 As of March 31, 2020, and according to the USD/JPY exchange rate at that date, when assets totaled ¥336.6 trillion (JPY)
View original content to download multimedia:http://www.prnewswire.com/news-releases/mufg-sees-divergent-effects-of-covid-19-pandemic-on-tech-and-telecom-companies-301074855.html