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Huge Opportunity for Google in Mobile Telecommunication

|Includes:Alphabet Inc. (GOOG), GOOG, S

Google should look to move into telecoms as the next phase of its expansion strategy. Such move would greatly compliment the infrastructures already in place, mainly Google talk and voice.


The mobile telecoms industry is becoming increasingly data intensive. The new 4G LTE network is incredibly fast, capable of delivering speeds greater than cable broadband. With such a fast wireless data network, I expect a strong shift in demand from traditional talk to VoIP calling. VoIP, or Voice over IP, allows its users to make phone calls using the internet. Calls made using VoIP are “free” in the sense that you do not use up any of your talk minutes. We have already begun to see a similar shift taking place in the mobile messaging realm, where third party apps like Black Berry Messenger and What’s App have significantly decreased the need for mobile text messaging.


However, a full migration to VoIP has not yet happened mainly due to reluctance on the part current mobile carriers. A large portion of their infrastructure and fixed costs are still dedicated to providing traditional talk and text. Most carriers only offer packages that include data with traditional talk and text plans. Many carriers have gone as far as blocking apps that allow users to make calls to traditional phone numbers.


I believe Google is well positioned to capture this growing mobile VoIP market. Google already have the VoIP Infrastructures in place with Google Talk and Voice. Currently Google users can make voice calls to any North American number for free and international numbers at for a significantly lower rate compared to mobile carriers. Google Voice is a web-voicemail service that allows its users to organize and view/listen to their voicemails using their Gmail Accounts. Owner of the most popular mobile OS, Android, Google is capable of developing a VoIP version of the Android OS, where all calls, voicemails, and messages are done entirely through Google Talk and Voice using wireless internet, foregoing any need for traditional talk and data infrastructure.


To complement the VoIP version of Android, Google should look to acquire a wireless broadband provider. A good candidate is Clearwire Corp, which specializes in providing high-speed 4G mobile internet services and whom Google already have a strategic alliance in place with. By acquiring Clearwire, Google can offer pure data plans to VoIP users, without any of the costs associated with maintaining a traditional network. (Since all calls/messages are made through wireless broadband using Google Talk/Voice) I believe this will allow Google to offer wireless packages at a significant reduced rate than its mobile carrier competitors.


Lower costs and Android/Google integration will drive demand. Initial demand will come from existing Android users but I expect more non-Android users to convert as the business becomes more established and positive word of mouth spreads from the early adopters. As a first mover in this market, Google will also have an advantage over new entrants. Through further integration of the wireless unit with its search/cloud/Motorola units, Google can deliver the most complete user experience that no one can match. This strategy will not only yield profits from wireless service business, but also higher ad revenue from an increased Android/Google user base, as well as from its Motorola acquisition as demand grows for Android handsets.

Stocks: GOOG, S, GOOG