Smartphone use doubles

Opportunities in the telecommunications sector?

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 February 1, 2013 2:40 pm AEDT

Australia's love-affair with smart phones continues to accelerate, with the switch from mobiles to touch-screen phones doubling in the last year.

The Australian Communication and Media Authority (ACMA) estimates that 49% of adults used a smartphone in the 12 months to May 2012, compared to just 25% at June 2011, a rise of 104%.

In its most recent report, ACMA describes smartphones as rapidly becoming the most commonly owned consumer electronics device. Premium smartphone releases such as Apple's iPhone 5 and the Android-powered Samsung Galaxy SIII have stimulated the switch, along with competitive plans from major mobile providers.

Increased competition has forced telecommunications providers to lower prices and include more offerings to entice customers. The rise of over-the-top (OTT) services has meant that demand for higher data allowances has also increased. OTT services are those that allow consumers to call, text and chat with other users via the internet and by-pass regular phone and text messaging fees.

ACMA has found that 54% of smartphone users were on plans with allowances of one gigabyte or more at June 2012, compared to 42% in the previous year.

That is causing an issue for telcos such as Telstra Corporation (ASX: TLS), Optus – owned by Singapore Telecommunications (ASX: SGT) and Vodafone. Traditional revenue streams are being eroded, and average revenue per user (ARPU) is falling.

Telcos are now being forced to expand further into providing content and data to their users as a means of shoring up their ARPU.

Foolish takeaway

Foolish investors could do worse than research stocks in the telecommunications sector. Companies like NEXTDC Limited (ASX: NXT) and Amcom Telecommunications (ASX: AMM) which provide some of the services required by telcos, could be perfectly placed to take advantage of the increased data usage.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Amcom.

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