* Lockdowns see surge in internet usage yet telco stocks fall
* World telcos lag tech sector, other defensives
* Sector suffers margin squeeze, debt, market disruption
* Unemployment, lack of roaming revenue seen hurting earnings
By Tom Westbrook and Douglas Busvine
SINGAPORE/BERLIN, April 14 (Reuters) - As lockdowns worldwide drive a surge in internet use, boosting online sales for businesses as varied as gaming and food delivery, the stocks of internet providers are an unlikely laggard on global markets.
In Asia, Africa, Europe and the Americas, a combination of high fixed costs, debt and market disruption has left telcos significantly underperforming the data-hungry businesses their networks carry.
"It's a bit of a surprise," said Kasper Elmgreen, equities head at Europe's biggest fund manager, Amundi Asset Management.
"The traditional defensive sectors have played defensive, but telecoms have not really been defensive," he said, pointing to price drops more or less in line with European markets.
Globally, a 13% drop in the MSCI world telecommunications services index .MIWO0TS00PUS pales in comparison to healthcare .MIWO0HC00GUS , down 6%, technology .MIWO0IT00PUS , down 8%, or consumer staples .MIWD0CS00PUS , down 10%.
The poor showing illustrates the difficult dynamics facing carriers, even when their services are more essential than ever.
Around the world, millions of people are confined to their homes and businesses closed as governments restrict movement to halt the spread of the coronavirus which has led to over 113,000 deaths.
That has driven business and entertainment online, but left telcos spending to service surging demand, and, with fixed pricing structures, no quick way to monetise the investment.
At the same time, roaming revenue has dried up as people travel less, and telcos are bracing for a slump in new contracts accompanying a wave of unemployment as businesses shut.
"Because of flat-rate deals, we hardly get any extra revenue if people spend more time surfing or talking on the phone," Ralph Dommermuth, chief executive of German telco 1&1 Drillisch AG DRIG.DE , told Reuters.
"I can't yet say whether more time being spent in the home office will compensate for revenue losses that will arise because many companies or private individuals have to put off renewing their contracts or can't pay their bills."
The outlook has driven stock drops as investors fret about dividends that have been under pressure for years.
"Not only do (telcos) have capex for 5G, but they also have debt payments," said Tariq Dennison, managing director at GFM Asset Management in Hong Kong. "So whenever their cashflows fall, their first priority has to be to those bondholders."
To be sure, the sector is not devoid of defensive characteristics, with the 13% fall in the MSCI world telecoms index comparing to a 16% fall in the broader market .MIWO00000PUS .
Falls have also unearthed bargains, with Dennison saying he took advantage of a dip in China Mobile Ltd's 0941.HK stock to increase his exposure to a firm with steady income and few debts.
Yet at the same time, firms the telecom infrastructure carries such as Netflix Inc NFLX.O and Amazon.com Inc AMZN.O have outperformed - leaving network operators behind even as customers flock online.
"I think that trend will strengthen after the crisis," said independent telecoms analyst Paul Budde in Brisbane.
"These are engineers digging cables in the ground, not the ponytail guys coming up with all the ideas."
BRACED FOR DOWNGRADES
But investors fear more to come.
Moody's Investors Service last week said Caribbean, Central American and Pacific network operator Digicel Group was at heightened risk of defaulting on bonds. Denis O'Brien told Reuters debt restructuring would be completed by June, and that revenue was broadly stable.
"The big question is that if people are going to be unemployed, what happens?" he said. "Will they be able to have the 50 cents to a dollar a day in surplus cash to spend on telco services?"
Roaming revenue has also all but evaporated as airlines ground planes - erasing some $25 billion in usually reliable cash for telcos, showed data from Juniper Research.
Still, some, like O'Brien, hope the storm will pass and even deliver a future with greater demand for data.
In Australia, Telstra Ltd TLS.AX has suspended cost-cutting, handed out free data and halted charging overdue fees. Yet it believes it can meet the bottom of its earnings guidance and its stock has fallen only half as much as the broader market this year.
"They're being a good corporate citizen and that comes at a cost," said Bruce Smith, principal and portfolio manager at Alphinity Investment Management in Sydney.
"But demand for their core businesses – mobile and broadband – is very strong and they'll probably come out of this with enhanced reputation and an enhanced market share," he said.
"It's a company for the times."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC: Telecoms lag defensives
https://reut.rs/3a31EsS GRAPHIC: E-commerce and its carriers diverge
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