Singapore Telecommunications Group (ASX: SGT), owner of Optus, has said it will launch a new 4G frequency that will challenge Telstra's (ASX: TLS) 4G network.
Head of networks Gunther Ottendorfer said the expansion will enable Optus to compete against Telstra, which has dominated the mobile industry over the past two years. Optus hopes to extend its network to over 70% of the population by mid-2014. Mr Ottendorfer said "We are eyeballing Telstra, this expansion should give us real opportunity to differentiate ourselves with TD-LTE and give Australians a very, very capable 4G combination".
TD-LTE has come from China and uses the same frequency to upload and download data but at different times. Telstra's and Optus's network currently uses separate upload and download channels.
The company reported that it has now upgraded more than 4,000 3G sites nationally and will turn on its new network in Canberra on Monday.
Optus is trying to make a duopoly for telecommunications in Australia and has impressed investors, sending its share price up over 39% in the past 12 months. Can it seriously challenge Telstra in the investing realm as well? At current prices, it offers a 4.5% dividend and has a potentially huge upside.
However, the upside requires it to meet targets and continually challenge its bigger rival, who has a clear market dominance and capitalisation. The new network will not be able to 'drop out' or become patchy in certain areas like Hutchinson Telecommunications' (ASX: HTA) Vodaphone has done recently which has exacerbated its share price slump.
Foolish takeaway
Telstra has rallied in recent years, from both a consumer and investor perspective. It pays a renowned dividend but has also said that it will be focusing on retention of its current 14.4 million customers, particularly as it predicts growth in the market to slow in coming years. This could adversely affect the performance of Optus. However, with a view to long term growth, Optus might provide investors with a slightly risky but potentially rewarding upside.
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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 contributor Owen Raszkiewicz does not shares in any of the mentioned companies.
