In 2001 there were those who thought the show could be over for Europe’s telecoms industry. Saddled with massive debts from buying 3G licences and financing global expansion, telecoms looked as if they had paid over the odds for the right to a market that was going to struggle. They were also still suffering from being at the heart of the “new paradigm” that was supposed to take the world economy into a whole new phase of super-efficiency but instead resulted in the ignominy of the TMT crash. That was then. Now telecoms are appearing in a new show of their own. In our cover story on page 24, Simon Hildrey looks at the latest performance. The sector is certainly back in the spotlight after giving a star performance. Over the year to January 31, the FTSE UK All-Share Telecommunications Services index has returned 22.5% compared with 16.6% by the FTSE All-Share index. There are also some strong individual performers, most notably Cable & Wireless, which saw its share price rise by 207% last year. Debt is no longer an issue, and has not been since the end of 2002. Telecom companies have cleaned up their act, restructuring their balance sheets and changing their managements. M&A activity is also back in the script, with Vodafone seeking to purchase AT&T Wireless. It is important to note, however, that all the excitement is not about telecoms as a whole. The sector includes incumbents – traditional, fixed-line operators such as BT – mobile operators like Vodafone, “alternatives” to the traditional fixed-line operators, such as Colt Telecom, and equipment companies such as Nokia. The real growth story is said to be in the mobile arena. The incumbents have now become more of a value play, with steady dividends and strong cashflow like the utility companies. But mobiles are back on an upward trend, the extent of which has surprised many observers, and there are positive signs on 3G. The danger of all the positive sentiment is that it has the potential to cause another bubble, albeit not quite as dramatic as that of 2000. Telecom stocks bottomed in October 2002, so the big gains have already been made by those investors who had the courage to invest at that time. Fund strategists would have to take a close look at which stocks fund managers are picking in the sector and where the growth is going to be generated. Otherwise the curtain might unexpectedly fall on the show.