The U.S. cellular phone industry has come a long way in the last couple of decades. From a high-priced luxury reserved for mobile executives in the late 1980s, to an affordable necessity today, the cell phone phenomenon has been hard to miss. For a handful of companies that got into the cell phone market early, it was hard not to make a profit. But with mobile phones more popular than ever now, is it still possible for investors to find growth in cell phone stocks? You bet!
From handsets to niche carriers, there's plenty of opportunity around in cell phones. You only need to know where to look. Today, we're doing just that.
Calling All Carriers
In the early days of the cell phone market, it made perfect sense for traditional landline providers to provide mobile phone service. As a result, telecoms started mobile divisions – either from scratch or through acquisitions. Today, the big three domestic cell phone carriers are Verizon (NYSE:VZ), AT&T (T) and T-Mobile - a subsidiary of Deutsche Telekom (NYSE:DT). All three companies have substantial operations besides their mobile businesses.
Recently, wireless operations have become a more dominant segment for these companies. The growing technological investment provided for the industry and a number of wireline divestitures and spinoffs means that mobile communications should account for a steadily growing chunk of revenues for the big three mobile carriers in the coming years.
If you're looking for more of a pure play on the cell phone market, however, there's plenty of selection there too.
Number-four carrier Sprint Nextel (NYSE:S) has more concentrated mobile operations, though it's not nearly as big or profitable as the big three. The stock started getting battered in 2007, as subscribers jumped ship in favor of carriers with better handsets and service. But as Sprint fleshes out its offerings, particularly its 4G data service, it should regain customers.
From a growth standpoint, one of the most interesting developments in the last couple of years has been in tiny niche carriers like Leap Wireless (NASDAQ:LEAP) and MetroPCS (NYSE:PCS). These companies offer unlimited wireless service within a local area for a fixed rate. With growing subscriber numbers and a novel business model, both Leap and MetroPCS have been garnering investor attention – and attention from acquisition-hungry competitors who are looking for subscriber growth.
Handsets Are Happening
As cellular service has expanded across the United States, so too have the capabilities of the phones themselves. That's resulted in a consumer mania to own the latest and greatest device on the market. You can invest in this trend by targeting the handset makers.
Apple (NASDAQ:AAPL) has been the poster child for handset makers in the last few years. When the company, formerly known for its computers and the ubiquitous iPod, unleashed the iPhone back in 2007, the device became a smash hit. Since then, the easily recognizable smartphone has sold millions of units and inspired scores of competitors to create an equally compelling – and profitable – counterpart.
Leading the charge have been Research in Motion (NASDAQ:RIMM), maker of the BlackBerry line of smartphones, Palm (NASDAQ:PALM), Motorola (NYSE:MOT), Nokia (NYSE:NOK) and HTC (TWSE:2498).
Other cell phone manufacturers include diversified electronics companies like Sanyo (OTCBB:SANYY), Samsung (KSE:005930) and Sony (NYSE:SNE). While their product mixes might not be as strongly skewed toward higher-margin smartphones as the companies above, their volume makes them worth looking at.
The coming year should be a strong one for handset manufacturers. Analysts are expecting growth in this market to rebound after the losses observed last year.
An Optimistic Outlook
With many analysts calling for improved conditions in the mobile phone industry as the year progresses, now is indeed an interesting time to turn to the cell phone industry as an investment. (For more on investing in this sector, see Dail Up Choice Telecom Stocks.)
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