Telstra betting on iPhone 5

4G technology gives telco a big advantage over its rivals

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published September 5, 2012 11:43 am AEST

Apple has titillated the media with an invitation to a September 12 event in San Francisco, at the same venue the company announced the iPhone 4. The email invitation had a large 12 on it, casting a shadow in the shape of a five.

Speculation is rife about what new features the new phone will have, including a larger screen and faster connectivity, including LTE technology. LTE or long term evolution, is what we know as 4G. LTE is a super-fast technology, enabling speeds of anywhere from two to five times as fast as 3G.

Telstra Corporation (ASX: TLS) is banking on the iPhone 5 featuring this technology, rushing a $500 million investment in its network over the next two years, much of it on expanding its 4G coverage.

Mobile phone carriers in Europe and Canada also use LTE technology on their networks already, which makes it more likely that handset makers will include LTE in their latest smartphones.

According to a report in the Australian Financial Review, more than 8 million mobile phone subscribers will be coming off contract during the 2013 financial year. Estimates suggest that between 2.5 and 4 million of those own an Apple iPhone 4, which was first released in September 2010, and may want to upgrade to the newer model.

There could also be more than 700,000 disgruntled Vodafone customers tempted to switch carriers, after two years of ongoing issues with the Vodafone network. Hutchison Telecommunications (ASX: HTA), which owns half of Vodafone, has been losing customers in droves already. In the first half of 2012, 178,000 subscribers left the network.

Telstra, by comparison, added 1.6 million customers in 2012, and being the only telco offering extended 4G coverage, could see many customers from Vodafone and Optus – owned by Singapore Telecommunications (ASX: SGT), switch to Telstra. Optus has only just started rolling out its 4G network, and that's just in Sydney and Perth CBDs for business customers. Vodafone wont launch a 4G network until next year.

The Foolish bottom line

Should the iPhone 5 contain LTE technology, Telstra has a huge lead on its rivals, and I expect the company to be aggressive chasing customers, to drive its dominance of the mobile phone market.

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Motley Fool writer/analyst Mike King doesn't owns shares in any company mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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