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Strong earnings and price momentum in 1998 have placed stocks in the foreign telecommunications industry in the top 25% of timely stocks due to industry growth in new fields and the formerly depressed stock prices. Data communication is replacing voice and wireless as the primary format and is expected to comprise 99% of the industry's traffic by the year 2003. The most successful companies and stocks are those which will upgrade their products and systems to meet customer needs.

Deregulation in the foreign telecommunications industry is resulting in new opportunities and high profits for many companies. Competition has emerged in the telcom sector and its related businesses, such as cable TV. Canadian and Mexican telephone companies are attracting investors' attention due to new regulations and promising performances. An alliance between British Telecom/MCI and Telefonos de Espana has been formed in an effort to dominate the international call market.

The agreement to acquire MCI Communications by British Telecommunications may likely be one of the century's largest mergers. Removal of protectionist provisions in Britain and elsewhere may be one result, as well as more consolidation in the future. Telecommunications companies in Japan, Italy, and Germany are also realizing the necessity of global competition. Foreign companies with American telephone ventures are the best investment risk.

L.M. Ericsson Telemateriel A.B. is probably the best and safest foreign telecommunications equipment company for investment purposes although competition may hurt Ericsson's domination of the foreign cellular telephone market. However, Scandinavian countries has responded to cellular phones far more than other European countries. Examination of whether foreign telecommunications equipment companies do the majority of their business with developing or already developed nations can be significant as developing countries offer the greatest possibility for future growth.

Many Western European countries are privatizing their telecommunication and other industries to reduce their deficits and meet 1999 European single currency criteria. Increasing competition and changed markets are among additional reasons for telecommunications privatization. Stocks in companies which have large markets in developing areas, or have competitive experience, are most likely to outperform the market.

More than 18 companies in the foreign telecommunications industry plan to raise funds in the capital markets in 1996. Many of the government-owned companies, such as Deutsche Telekom, plan to privatize in whole or in part, as well. Competition in international services has been proposed by Oftel of the UK. These stocks are not timely for 1996 as they are affected by restructuring, competitive pricing, and other pressures.

The mobile communications market in Europe is expanding in excess of 50% per year, due to reduced tariffs and encouragement of the European Union. The highest penetration rates for wireless services are in Scandinavia and the United Kingdom. More than $75 billion in foreign telecommunications stock will be floated by the year 2000, but competition and restructuring are affecting these stocks adversely and share prices are not expected to rise.

Demand for telecommunications is increasing in the Far East, both in fixed line and cellular services. Installation of 150 million lines is anticipated by the year 2000 costing $1500 each. The largest Asian market is China with a population of 960 million and a low ratio of access lines. This industry will underperform the market for 1995 and 1996, but has a large earnings potential for the year 2000 and beyond.

Global alliances and modernization are impacting foreign telecommunications firms in the 1990s. The U.S-China telecommunication volume is forecast to treble by 2000 along with increased calling between the U.S. and Europe. The telecom market in Germany, third after the US and Japan, will increase from $40 billion to $75 billion in the same period. Earnings from 1996 to 1998 will be held down by restructuring and competitive pricing.

Foreign telecommunications companies are not recommended for short-term investment, but various factors, including surging demand for information services and rapid technological advances, will favorably influence their long-term earnings and growth potential. Developing countries are building high-tech infrastructures where none existed before, and foreign telecom companies are providing the necessary financing. Return on that investment will probably not show until the next century. The transitioning market has led to low share prices, and an increase in those prices is not predicted to take place in the near future.

Foreign telecommunications firms will face greater competition, more regulation, international alliances and additional cellular communication services. The major conquest for telecommunication contracts by foreign firms is China because of its rapidly growing economy. China expects to invest approximately $100 billion in telecommunication equipment by the year 2000. High stock price performance is expected from Reuters, Ericsson and Vodafone in 1995.

Non-US telecommunications companies have a number of issues to deal with in 1994. For example, foreign telecommunications equipment manufacturers are competing for a share in the potentially lucrative market in China. Some telecommunications companies are joining together to form large, multinational alliances that will offer a combination of telecommunications services.

The foreign telecommunications industry has been marked by increasing competition especially in the UK and Canada. Companies from France, Sweden and Canada are competing for orders from China which plans to spend $25 billion through 1997 to modernize its telecommunications systems. The American Depository Receipt prices for a number of foreign telecommunications companies have dropped recently. The fundamentals for companies in this industry group remain positive.

Foreign telecommunications companies have a great opportunity to grow into emerging nations, as the majority of countries lack telephone services equivalent to the Western nations. However, given that most of the foreign companies were only recently privatized by their governments, it will be some time before they become competitive and profitable. Investors should examine individual stocks to determine how far along toward competitiveness each company is.