Watch Out AT&T: Facebook Could Take Over The Smartphone

| About: Facebook (FB)

Facebook (NASDAQ:FB) may be the go-to for interacting with friends near and far but if the social media company has its way it could take over your smartphone -- and I'm not talking about Facebook Home, the hybrid operating system and app that lets Facebook takeover the home screen of Android phones.

The concept there is to incorporate the Facebook system into normal phone actions -- but Facebook has been gearing up for phone integration for years. In 2010, Facebook Director of Engineering Andrew Bosworth said it simply: "It should feel like a conversation" -- and the company has been moving towards that goal steadily ever since. In 2011, Facebook added the ability to video chat to its popular Messenger service and even now the social media giant is quietly rolling out a Messenger feature called "Free Call" which allows users to call each other using Voice Internet Protocol (VoIP), a similar technology to Skype, as well the ability to send voice messages.

VoIP may not be anything new -- Skype and Google (NASDAQ:GOOG) Voice have been around for years -- but where Facebook is really amping things up is in offering all these features in a one-stop shop with a user base that has been increasing by 25% year over year and already has over one billion monthly active users. Compare that to Skype's 280 million monthly users or Google Voice's 3.5 million daily users. Moreover, it is easy and automatic. Users don't have to keep track of phone numbers, user names or even email addresses -- all they have to do is simply click on their friends' names. Plus, these features are simply embedded into Facebook app updates meaning that users don't have to do anything special to gain access to the new features. The value of the convenience simply can't be measured, and it could be part of the reason Skype is teaming up with Microsoft (NASDAQ:MSFT) Messenger to streamline its own user experience.

And the implications could be far reaching. With Wi-Fi hot spots seemingly everywhere, at least in more urban areas, why would smartphone users pay much for cell service? Obviously, cell phones have their uses outside wireless enabled areas but it stands to reason that cell phone users may not be so keen to pay the $100 per month carriers like AT&T (NYSE:T) and Verizon (NYSE:VZ) charge smartphone users for unlimited minutes and a couple gigs of data. "Texting may appear to be an insignificant cost on customers' cell phone bills, but it's actually an incredibly expensive way to send data," says CNN Money. "Text messages max out at just 160 bytes, which means the standard 20-cents-per-message plans cost wireless customers an astounding $1,250 per megabyte."

So, why wouldn't consumers switch? The technology for "free" mobile messaging is already present in the apps they use on their smartphones everyday and it doesn't cost them a dime.

More importantly, according to a report issued in November 2012, the trend may already have started. "U.S. cell phone customers sent an average of about 675 messages per month in the third quarter, down from around 700 per month in the prior quarter," writes CNN Money. "Cell phone carriers' text messaging revenues were also down last quarter for the first time in history." And given that more than half of the cell phones in use in the US are smartphones, the trend is bound to continue.

Point in fact, Facebook shares have been climbing since November, but there is still room to get on board. The stock is currently at $26.63 and analysts are giving the company a one-year price target of $33.16 -- that's a projected return of almost 25%.

Insiders certainly seem to be on board. On April 15, two directors and three officers acquired stock in Facebook, including Reed Hastings of Netflix (NASDAQ:NFLX) fame and David Ebersman, who currently has over 2.2 million shares in the social media company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.