Long-Term Evolution (LTE), the most sought after next-generation (4G) super-fast wireless communications technology, is rapidly gaining momentum worldwide. 4G wireless networks primarily aim to cope with the substantial rise in demand for high-speed wireless data services and mobile video.
The Global Mobile Suppliers Association (GSA) recently reported that at the end of 2014, 364 LTE networks were commercially available across 124 countries. This figure is higher than GSA’s initial projection of 350 LTE networks. GSA predicts that this number will cross 450 by the end of this year.
Meanwhile, a recent report published by Ovum stated that globally the total number of LTE subscriptions reached 497 million at the end of 2014, driven by 115 million net additions in the fourth quarter alone.
In 2014, telecom operators across the globe launched 96 LTE networks. Together, 611 telecom operators have clearly stated their intention of deploying LTE networks covering 174 countries.
Moreover, 80 operators in 42 countries are currently rolling out Voice-over-LTE (VoLTE) technology while 14 operators have already launched HD (High Definition) VoLTE services in 7 countries.
In 2014, research firm GSMA Intelligence reported that LTE users consume an average of 1.5GB data per month, twice the amount consumed by non-LTE users. In the developing countries, LTE users probably generate 20 times higher average revenue per user (ARPU) than non-LTE users, whereas in the developed countries ARPU is likely to be 10%-40% higher from LTE users in comparison to non-LTE users.
Asia-Pacific at the Forefront
While the U.S. is expected to maintain the momentum in LTE network growth over the near term, the major impetus is likely to come from the emerging markets of Asia-Pacific. Countries, such as China, Japan, Taiwan and South Korea are significantly expanding their nationwide LTE network either through Time Division Duplex (TDD) or in Frequency Division Duplex (FDD) mode.
At the end of 2014, Asia-Pacific comprised 47% of the total global LTE connections, up from 40% at mid-2014. North America accounted for 33% LTE connections, down from 42.3% at mid-2014 while Europe’s share went up to 16% at 2014-end from 14.3% at mid-2014. Finally, the rest of the world’s share improved marginally to 4% from 3.4% halfway through the year.
Our Top Picks
At this stage, we believe investors should choose stocks which promise strong dividend yield and carry a favourable Zacks Rank to cash in on the future growth that LTE offers. We present three Zacks Rank #1 (Strong Buy) stocks with upside potential.
China Mobile Ltd. CHL: The largest telecom operator in the world with respect to subscriber count currently provides a dividend yield of 2.87%. At the end of Jan 2015, the company had 106.8 million LTE-TDD subscribers and it aims to expand its LTE customer base to 250 million by the end of this year.
Worldwide, China Mobile has launched LTE international roaming services in 71 countries. At Jan 2015 end, China Mobile had 808.56 million mobile (2G/3G/4G) subscribers. This implies the company has significant scope to convert its 2G and 3G customers to 4G LTE networks.
China Telecom Corp. Ltd. CHA: The second largest Chinese wireless network operator currently provides a dividend yield of 1.85%. On Feb 27, 2015, the company received operational permit from the Chinese government to deploy LTE-FDD network across the nation.
At the end of Jan 2015, China Telecom had 186.67 million mobile subscribers including 120.75 3G subscribers. The company expects its 4G LTE subscriber base to reach 100 million by the end of this year.
Chunghwa Telecom Co. Ltd. CHT: The largest Taiwanese wireless network operator currently provides a dividend yield of 2.00%. Chunghwa has won 2 slots of 1800 MHz spectrums for the installation of 4G LTE wireless network. Furthermore, the company intends to bid for 2600 MHz spectrum in an auction expected to be held this year.
At the end of 2014, the company had 11.33 million mobile subscribers, of which 1.33 million were LTE subscribers. Chunghwa currently commands a 38.6% LTE market share in Taiwan which management aims to increase to 40% by year end.
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