3 Wireless Communication Companies Worth Watching
Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Currently, there are around 5 billion mobile users in the world, out of which 1.08 billion are smartphone users. Around 84% of smartphone users access the Internet on their phones. An increase in the downloading of applications has led to an increase in data usage by smartphone users. The highest amount of data is consumed by Android users at 582 Mbs a month, whereas iPhone users consume 492 Mbs a month.
Between smartphones, high speed Internet lines, and expanded networks there is ample room for growth in this ever expanding market. This article analyzes the initiatives taken by three companies to meet the increasing demand for Internet services and their expansion plans for long term growth.
Introducing high-performance smartphones
Vodafone (NASDAQ: VOD) has expanded its Vodafone Red, a multi-country five year marketing campaign, to include 14 European markets. Under this campaign it has introduced a new “one Vodafone Red” plan to attract European customers. The plan offers reasonable data allowance, unlimited calls, and messages to any network across Europe. Under this plan it has also added a new roaming pack of €3 per day that allows customers to make calls, send messages and use data “worry free.” It is available on Vodafone’s contract phones as well as other phones. Through this plan, customers will have an option to connect with Vodafone’s 4G service to be launched by the end of this year. Vodafone reported four million customers in May and aims to acquire 10 million customers by March 2014 through this campaign. With this expansion, the total European service revenue will increase from $9.20 billion in 2012 to $9.45 billion by the end of this year.
On June 12, 2013, Vodafone launched two new smartphones, Smart III and Smart Mini, after the success of Smart II. Both of these are high performance smartphones specially designed for mass market to accelerate the use of mobile Internet. The phones include the latest Android and Vodafone applications. The Smart III has a 4-inch screen with an excellent processing power and memory. The Smart Mini is a unique combination of high-performance and quality. Both phones are available on Vodafone’s prepaid and postpaid plans, as well as on one Vodafone Red plan. With the launch of new phones, total revenue expected from Europe for this year is $40.71 billion and $42.12 billion for the next year.
World’s longest submarine cable system
America Movil (NYSE: AMX) along with its technology partner Alcatel-Lucent, will construct an undersea fiber optic cable system, “AMX-1.” It will be the world’s longest (17,500 km) undersea cable system to transmit 100 Gbps speed. It is expected to start in late 2013. AMX-1 will pass through seven countries, providing domestic and international high-speed connectivity. This cable system will benefit America Movil's 256 million wireless subscribers and enhance broadband services. AMX-1 will help the company to earn higher revenue as it will be available in seven countries; net revenue expected for this year is $57 billion, and $58.3 billion for 2014.
In order to expand in the U.S., America Movil's US subsidiary TracFone acquired Start Wireless Group, which is a mobile virtual network operator, or MVNO. Start Wireless is a third party operator known for its specialties in data services, prepaid plans for voice, and messaging. It is TracFone's second major acquisition after acquiring Simple Mobile last year. TracFone had 23.2 million subscribers in the first quarter of 2013, adding 1.4 million after the acquisition. With the increased subscriber base, America Movil's service revenue expected for this year is $51 billion and 52.92 billion for the next year.
4G expansion plan
Mobile Internet is the key driver of China Mobile's (NYSE: CHL) revenue growth. The company has around 95 million users on its 3G network and more than 650 million users on its 2G network. To add more users to its 3G network, the company is negotiating a deal with Apple to offer its 3G network for iPhone in China. With the execution of this deal China Mobile can add around 2 million to 3 million users to its 3G network. This deal will help China Mobile increase its data average revenue per user, or ARPU, as there will be increases in 3G usage. ARPU in 2011 was $6.47 and will increase to $10 this year, which will enhance the total revenue of the company.
China Mobile will launch Time-Division Long-Term Evolution, or TD-LTE, a 4G network, this year. The company wants its users to shift to 4G. It will roll out around 200,000 TD-LTE base stations that will cover 500 million people across 100 cities by the end of this year. In the long run 4G will drive high demand for data, which will allow China Mobile to attract more users. With the launch of a 4G network, total revenue will increase from $91 billion last year to $94 billion this year and $102 billion next year.
Vodafone will attract more users and generate higher revenue by expanding Vodafone Red across Europe and launching two new high-performance smartphones.
AMX-1 will benefit America Movil’s broadband service and wireless subscribers. The acquired company will help to improve data services and other services, which will generate higher revenue.
4G network will boost China Mobile’s revenue in the coming years, and the possible deal with Apple will accelerate its Internet service.
I recommend a buy for all three stocks.
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Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Vodafone. The Motley Fool owns shares of China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!