What Will These Communications Stocks Tell Your Portfolio? – Telecom Argentina S.A. (ADR) (TEO), Oi SA (ADR) (OIBR), Cogent Communications Group, Inc. (CCOI)

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Telecom Argentina S.A. (ADR) (NYSE:TEO) is just known as Telecom in Argentina. Rather like Fed-Exing something or using Kleenex, it’s good to be set in people’s minds like that. I like that 4.21% of Telecom Argentina S.A. (ADR) (NYSE:TEO) is owned by its employees, as I like how hard that gets people to work. I’ve worked for employee-owned companies, and it’s generally good for morale to feel like you’re working for yourself with the support of an experienced group. I also respect Telecom Argentina S.A. (ADR) (NYSE:TEO)’s 11.5% profit margins and trading valuations close to Oi’s levels. It’s hard to fault a company with a 5.63 P/E ratio that has such a lock on Buenos Aires

However, every silver lining has a dark cloud. While 41.5% of Telecom Argentina S.A. (ADR) (NYSE:TEO) is publicly traded, 54.74% of the company is owned by a consortium that includes Telecom Argentina S.A. (ADR) (NYSE:TEO) Italia, France Telecom Argentina S.A. (ADR) (NYSE:TEO) and the Werthein Group. So if you like to flex your shareholding muscles, you’ll have a tough row to hoe getting past the aristocrats at the top. Since most people don’t vote their shares actively, this is a minor concern.

And of course, there’s the way Telecom likes to flex its muscles. Being the main game in town, Telecom can screw people over at its leisure. How would you like to be able to tell several million people that they have to pay for their phone service by the minute instead of a flat rate like everybody else has? How would you like to receive government subsidies to expand service into rural areas and either completely avoid doing so or simply install token pay phones instead of adding service properly? How would you like to be able to write up overly complicated contracts that include prices that ignore taxes and that omit important information about the service terms?

These are some of the criticisms that Telecom has come under fire for over the years. As a potential shareholder, I’d have to ask myself: If the company is willing to throw its customers under the proverbial bus, how much loyalty could I expect? I think Telecom is cheap because not a lot of people really want it, 5.9% dividend or not.

We’ve looked at a hardcore Latin American brand, a center piece of the Internet and a major telephone company and they all say something. In some cases they say they couldn’t care less about their shareholders, while in other cases they say their adaptive capacity isn’t that great. No matter how big, well known or profitable a company is, sometimes you have to read between the lines a bit.

The article What Will These Communications Stocks Tell Your Portfolio? originally appeared on Fool.com and is written by Chris Hodge.

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