How TeliaSonera and SQM Could Benefit From Smart Phone Growth

 |  Includes: SQM, TLSNF
by: Power Hedge
Over the past few years, the mobile device industry has undergone a major revolution. Not too long ago, the mobile phone industry was primarily dominated by simple mobile phones that offered little other than voice communication and SMS/MMS messages. Today, the largest growing segment of the mobile device market consists of devices which are more akin to small computers than to traditional mobile phones. The shift towards these “smart phones” offers profit opportunities for investors to exploit.
Here are two companies that could profit from this growing international trend that seem to be getting less attention from investors than they deserve.
TeliaSoneraAB (OTCPK:TLSNF) is a Swedish-Finnish multinational telecommunications company. TeliaSonera is headquartered in Stockholm, Sweden and has operations in most of the Nordic and northern Europe countries except for Iceland, the Baltic countries, Georgia, Moldova, Spain, Tajikistan, Turkey, and Nepal. TeliaSonera is one of the largest mobile operators in the world with slightly less than 160 million wireless subscribers.
In December 2009, TeliaSonera launched the world’s first commercial 4G wireless network in Sweden and Norway. TeliaSonera expanded that network last year to include the Nordic states of Finland and Denmark and the Baltic nation of Estonia. At the end of last month, TeliaSonera expanded its 4G network further by becoming the first carrier to offer 4G in the Baltic nation of Lithuania.
TeliaSonera also has a nationwide license for 4G based on LTE from Uzbekistan but has not yet rolled its network out to that country. The company has also conducted field tests and made preparations for a 4G rollout in a few other countries, but has not yet obtained licenses from their respective governments. This should, however, enable TeliaSonera to quickly roll out 4G in those countries once the licenses are granted, further expanding its footprint.
TeliaSonera also owns and operates an international IP and voice wire-line service called TeliaSonera International Carrier, a Tier One network that owns more than 27,000 miles (43,000 km) of fiber spanning 35 countries in Europe, Asia, and North America. TeliaSonera International Carrier focuses primarily on the business of providing high-speed transit of voice and data traffic. The company also provides customized telecommunications services to the media, education, and online gaming industries.
The increasing popularity of smart phones and tablet PCs has driven a fundamental change in consumers’ media consumption habits, particularly when those consumers are away from home. TeliaSonera conducted a recent survey of its 4G customers. The results speak for themselves:
  • 23% now watch more TV online than before they subscribed to 4G.
  • 28% now listen to more web radio and use music streaming services such as Spotify.
  • More than 46% surf the web more frequently when away from home.
  • 12% play more online games when away from home.
TeliaSonera launched, in partnership with Samsung (OTC:SSNLF), the world’s first 4G laptop in Sweden in January. The previously alluded to survey was conducted before this laptop launched, but it is fair to assume that buyers of this laptop will be just as voracious consumers of media as smart phone and tablet users.
All of this points to one thing: An ever-growing demand for bandwidth. TeliaSonera is well positioned to provide that bandwidth, offering a variety of 4G data plans in the five countries where its 4G network has been rolled out. These plans offer between 5-80 Mbit/s of speed; this is a substantial speed increase from 3G. The faster speed could cause consumers to switch from their old 3G plans and to TeliaSonera's 4G network. TeliaSonera is thus well-positioned to benefit from app- and media-hungry wireless consumers.
Sociedad Quimica y Minera de Chile (NYSE:SQM) is a Chilean potash, iodine, and chemical products company. It is not these products that will enable SQM to profit from the growth in smart phones and tablets, however. SQM controls the salar brines of the Andes Mountains, which contain the highest known concentrations of lithium in the world. It is the lithium in these salar brines that could generate smart phone-related profits for SQM.
I recently published an article on Seeking Alpha that explained how SQM could benefit if the U.S. government begins upgrading or converting its automobile fleet to hybrid vehicles. SQM offers a similar investment thesis from the growth of smart phones and tablets. Many investors are attempting to profit from the growth in this technology by investing directly into one of the many companies that make the wireless devices. That is certainly one way to profit off of this growth industry, but it could be difficult to determine exactly which company, platform, or device will ultimately win out in the industry. That is the beauty of SQM: This company will profit no matter who wins the “smart phone wars” and it will also profit whenever any device – laptop, smart phone, or tablet – from any manufacturer is sold.
The reason for this is SQM’s tremendous lithium assets. Most, if not all, smart phones, tablets, and laptops use batteries that contain lithium. Sociedad Quimica y Minera controls the largest concentrations of lithium in the world and is naturally the largest producer of lithium in the world. SQM is thus well-positioned to profit from smart phone growth by providing the lithium that is required to make the batteries for these devices.
The very nature of smart phones and tablets requires portability. These are also electronic devices that require energy to operate. It is unlikely that a consumer purchasing a smart phone or tablet will have any interest in carrying around a power cord to operate the device. Thus, the demand for batteries should grow along with the demand for tablets and smart phones. As the demand for batteries grows, the demand for battery components and materials will also grow. SQM is sitting with its lithium, ready to profit.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.