Mobile subs keep rising -- who's benefiting most?

Mobile subs keep rising — who's benefiting most?

Telstra, Optus and Vodafone scramble for new business.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published October 9, 2013 7:23 am AEDT

A new report by the Australian Bureau of Statistics (ABS) confirms the Australian love affair with internet-enabled smartphones and tablets is getting deeper. Across all internet service providers, mobile subscriptions are up 13% in the last six months alone, as faster speeds and competitive pricing see more consumers sign up.

Big telco players well positioned to cash in on the move to mobile include Telstra (ASX: TLS) and Singapore Telecommunications (ASX: SGT) owner of the Optus network. Their competition is limited due to the difficulties setting up mobile infrastructure in Australia, a huge land with relatively with few people.

The ABS report shows there are currently 19.6 million mobile internet subscribers in Australia and Telstra has been a clear beneficiary of this fast-growing market. For mobile, it put on both market share and subscriptions in financial year 2013 and consumers keep flocking to its high-speed 4G network. Since June 30 Telstra says it has connected a further 350,000 devices to the network. Compounding this has been the problems experienced by rival operator Vodaphone, part-owned by Hutchison Telecommunications Australia (ASX: HTA).

Network operators generally offer mobile data plans to consumers that pro-rata charges according to the amount of data downloaded in a given time period. Notably, data download volumes have seen explosive growth, the ABS reporting a 43% increase in the period April to June 2013. This looks to be a long-term positive for future telco revenues.

Technology can be a double-edged sword though, with the old-fashioned text message falling victim to a free impostor. Instant messaging services provided on downloadable chat applications have seriously eroded a once reliable revenue stream for telco operators. Social networks and free messaging apps mean the writing may be on the wall for the text message, if not the rush to abbreviate the entire English language into handheld text talk.

Foolish takeaway

The growth of mobile use sure looks a sweet spot for telco investors to profit from. It's a competitive field though and picking the right companies at good prices is the key to successful investing. King of the telcos is Telstra, discover whether you should buy, sell or hold Telstra shares in our brand-new report, written by a top Motley Fool analyst. It's free, click here for your instant download!

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Motley Fool contributor Tom Richardson owns shares in Telstra.

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