DEFINITION of 'Telephone Bond'

Bonds issued by telephone companies, or obligations of issuers who operate in the telecommunications sector. Once viewed as the quintessential safe investment, the appeal of telephone bonds has diminished in recent decades with the advent of deregulation and intense competition.

BREAKING DOWN 'Telephone Bond'

Telephone bonds have been in existence since the first decade of the 20th century. Telephone companies in the past derived their revenues through traditional phone services such as landlines and long-distance charges. However, they now garner an increasing proportion of their revenues from services such as wireless, internet access and data transfer, making their cash flows less predictable than in the past. This decrease in cash flow stability, coupled with the bankruptcy of companies such as WorldCom , has reduced the appeal of telephone bonds to some extent.

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