The enormous competitive advantages enjoyed by
) in the US telecommunications market result from their ability to
out-invest smaller rivals.
Asian telecoms such as
) are also investing heavily in network technology. China is the
world's biggest mobile market, with 1.1 billion subscribers.
But there's one region that stands out for its lack of network
investment growth, on top of its continuing economic problems:
AT&T and Verizon spent about $35.7 billion combined on their
wireless and wireline networks in 2012 - approximately 54% of the
total US network investment.
The Telecommunications Industry Association's (TIA) 2013 ICT Market
Review & Forecast reported that US wireless penetration hit
102.5% of the adult population in 2012, surpassing 100% for the
first time. Wireless carriers are on track to add 40.3 million
subscribers over the next four years, for a penetration rate of
111.3% by 2016.
China's three mobile operators plan to spend a combined $56 billion
in 2013 on network infrastructure, and $6.75 billion on 200,000 4G
base stations to provide services for their 710 million customers.
Europe is lagging, held back by a still-sluggish economy, as well
as a burdensome bureaucracy. While mobile and Internet service is
relatively inexpensive and widespread, current infrastructure is
increasingly challenged to support new offerings such as video and
cloud computing. The Continent trails the US and Asia in the
adoption of 4G and fiber-optic technology.
Neelie Kroes, the European Union commissioner running the digital
technology portfolio, supports a proposed €50 billion ($68 billion)
"Connecting Europe Facility" program for cross-border
infrastructure projects. €9.2 billion would support expanded
broadband and digital networks. Kroes also favors establishing a
single telecom market for Europe.
It's this type of landscape that's allowed AT&T and Verizon to
establish fast and reliable service in the US. And their ability to
attract and keep valuable postpaid subscribers supports long-term
dividend sustainability and growth.
Verizon, in particular, has been a star, with a total return since
the March 2009 low for global equities of 160%-plus. It's also been
an outperformer over the trailing 12 months, with a total return of
32.7%. AT&T is also up more than 16% over the past year, and
111% since March 6, 2009.
There's hope that
(OTCMKTS:DTEGY) €30 billion, three-year investment plan announced
in December 2012 will help lead a return to investment in the
Europe, Middle East, and Africa (EMEA) region.
Deutsche Telekom has enjoyed a solid run over the past year,
posting a total return in US dollar terms of 26.9%. But the German
giant's current dividend rate is in doubt even after a December
2012 cut, as it continues to try to get out of its T-Mobile USA
) are both in the red over the trailing 12 months. However,
(TEF), for its part, is actively expanding its presence in South
America. The company temporarily eliminated its dividend in 2012,
but is on track to resume its payout later this year.
Telefonica reported encouraging results for the first quarter of
2013, as revenue contraction stabilized in its home market and
organic growth in South America was 6.8%. Telefonica has a ways to
go, but it is a good way to play a rebound in Europe.
Editor's Note: This article was written by David Dittman of
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