AT&T and Verizon are in a race to build faster next-generation networks based on a technology called LTE in an effort to have customers use their data services more. Verizon is in the lead, with LTE deployed in 230 markets, compared with AT&T's coverage in 35 markets.
Faster networks aren't cheap to build, but they could turn in big numbers for carriers in the long term by encouraging customers to use data-intensive applications, like video, even more.
Cisco (CSCO), the networking company, recently published a study showing that use of mobile data more than doubled in 2011, driven by fourth-generation, or 4G, networks. A smartphone on a 4G network is likely to generate 50 percent more traffic than it would on a slower one, Cisco said.
While it may seem like everyone and his or her dog has a smartphone, the truth is, less than 50% of U.S. mobile consumers have a smartphone. As these consumers transition to smartphones -- and as mobile products like iPads replace stationary computing -- mobile internet is going to be huge.
Investment Strategy 1: Network Providers
People wanting to access the internet on the go will obviously be shopping for a network provider, putting U.S. companies like AT&T (T) and Verizon (VZ) in positions for great profit. These companies are seeing strong growth trends, especially in wireless data:
AT&T said that net income in the first quarter rose to $3.6 billion, or 60 cents a share, from $3.4 billion in the same quarter a year ago, while revenue climbed 1.8 percent to $31.8 billion.
Revenue from wireless data jumped 19.9 percent to $6.1 billion from the year-ago quarter, AT&T said. The company said that 60 percent of its data customers were paying for its tiered data plans and of those, 70 percent were opting for the more expensive plans.
AT&T and Verizon are some of my favorites in the domestic telecommunications sector, because both AT&T and Verizon are great dividend stocks with current annual yields around 5%. For interested investors, Rajiv Tarigopula provides a thorough analysis of AT&T's positioning here.
For investors looking into global companies, some options are: Nippon Telegraph & Telephone (NTT), Telefonica SA (TEF), China Telecom ADS (CHA), China Unicom (CHU), BCE Inc (BCE), France Telecom ADS (FTE), BT Group PLC (BT), CenturyLink (CTL), Chunghwa Telecom (CHT), Telefonica Brasil SA (VIV), Telekomunikasi Indonesia (TLK)
Investment Strategy 2: Network Infrastructure Providers
Building the infrastructure necessary to sustain massive of consumption is no small investment, and certain companies in the business of building infrastructure will reap the rewards of those investments.
With worldwide mobile network traffic expected to increase 18-fold between 2011 and 2016, Cisco today introduced the foundation for a new generation of mobile Internet networks: the Cisco(R) ASR 5500 platform.
Cisco is acquiring and developing technology, placing it ahead of competitors like Juniper (JNPR). Such moves are solidifying Cisco as one of the frontrunners to profit from the coming mobile internet boom.
Investment Strategy 3: End-User Hardware Providers
The nice thing about consumer technology (from an investor's point of view) is the fact that it all goes obsolete in three years, ensuring that hardware producers have steady income as people buy the newest and latest gadget. I've written about why I heart Apple (AAPL), but there are plenty of other companies out there. For example, chipmakers Qualcomm (QCOM), ARM Holdings, (ARMH) and Intel (INTC) could see huge gains as more and more global consumers purchase hardware based on their processors. You can't forget about Microsoft (MSFT) either -- and who knows, maybe Nokia (NOK) or Research In Motion (RIMM) will make a come back. (But personally, I'd recommend going with the frontrunners.)
Conclusion: Mobile Internet Will Change The World (And Your Portfolio)
I'm bullish overall on U.S. stocks, but I'm especially bullish on companies set to profit from the rise of mobile internet. Obviously, when investing in any company, it's important to conduct due diligence and analyze the balance sheet, financial metrics, news, etc. This article is not meant to be a thorough analysis of each of the stocks mentioned -- it's just intended to provide an overview of an up and coming sector (mobile internet) which will provide great investment opportunities.
I'm certainly bullish on AT&T, Cisco, Intel and Apple. Do your own research on the others mentioned, and you might find some tantalizing growth prospects.
Disclosure: I am long CSCO.
Additional disclosure: I may initiate a long position in one or more of AAPL, INTC, T in the next 72 hours.