President Barack Obama's decision to normalize U.S. diplomatic and economic relations with Cuba, which had been strained until recently since 1961, has started showing results. Under Obama's administration, new Cuban policy regulations, approved by the Treasury and Commerce departments, have helped the U.S. telecommunications industry gain initial exemptions from the existing embargo to invest in Cuba.

Recently, U.S. telecom regulator Federal Communications Commission (FCC) removed Cuba from its exclusion list enabling U.S.-based telecom operators to provide telephone and Internet services to Cuba without the need of a separate approval from the FCC.

The newly developed truce between the two countries will allow U.S. telecom carriers to export telecom equipment and products to Cuba. The operators will also be able to establish the necessary infrastructure in Cuba to offer various telecom services including the Internet. The export of communications devices, related software, applications, hardware, and other items to upgrade the systems will enable Cuban citizens to communicate freely with the U.S. and the rest of the world.

In Mar 2015, U.S.-based IDT Corp. formed a joint venture with Cuba's Empresa de Telecomunicaciones de Cuba SA to provide direct international long-distance service. In Apr 2015, Sprint Corp.'s S prepaid service division - Boost Mobile - launched an unlimited voice call and text message service plan to boost connectivity between the U.S. and Cuba.

In Sep 2015, Verizon Communications Inc. VZ became the first U.S. telecom operator to offer roaming wireless services in Cuba. More recently, low-cost online streaming service providers Netflix Inc. NFLX started offering video services in the country. We believe AT&T Inc. T , which is at present significantly expanding in Mexico, may also turn toward Cuba in the future. However, the company is yet to take any decision in this regard.

Cuba is a less developed country with a population of around 11 million. At present, only 2 million of the inhabitants have access to global Internet connection through government institutions, high-end hotels and the black market. People in Cuba access the Internet under highly restrictive conditions.

The Cuban government strictly monitors global networks, keeps a check on phone connections of anti-government activists and surveys private email accounts through the installation of software in offices. Such stringent measures have significantly escalated the price of telecom gadgets and services in Cuba.

Our View

We believe that the U.S. telecom operators may not reap any near-term gain from Cuban investments as the country is less developed at present and reels under highly restrictive government regulations. However, in the long-term, Cuba may become a boon for telecom carriers whochoose to operate in the country. An opportunity to sell products and services to 11 million untapped customers is something worth reckoning after all.

Moreover, with communism waning and winds of globalization taking over the world, Cuba is poised to become a potential emerging market for the future. Further, Cuba's geographical proximity with respect to the U.S. is a major positive in terms of cost of operations. The U.S. telecom industry is currently witnessing cut-throat pricing competition. At this juncture, an opportunity outside the U.S. may bode well for the industry.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NETFLIX INC (NFLX): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.