If you thought you missed the boat on lucrative wireless investment—think again. The seeds of wireless communications that have minted billionaires in the U.S. are now budding in the explosively fertile land of Latin America.
We’re still only at the start of this game, with a mere 25 percent of the world enjoying access to global communications networks. And every segment of this is exploding in Latin America—from wireless communications service providers and cable TV companies, to the most lucrative niche of independent cell tower landlords.
Across segments, rapid wireless subscriber growth and heavy investments in LTE rollout make Latin America a phenomenally fertile investment opportunity.
Just watch what the giant American telecoms are doing—and where they’re looking for their next big win. AT&T is hungrily pouncing on Latin America—particularly Mexico—for growth because the U.S. market is already mature.
Wireless subscribers in Mexico have increased 37 percent year on year, and wireless revenues are up 9.5 percent over the same period.
We are right at the heart of a big data market evolution in the Latin American telecommunications industry, and this is the prime time to get a foothold. Led by Brazil and Mexico, Latin American telcos are expected to invest nearly $1.79 billion by 2022 in big data services.
The growth in the number of cellular phones has increased by more than 17 percent in the last year, according to Teleco. Brazil has several telecom companies which are publicly traded, most of which trade on the New York Stock Exchange. According to the free list of Brazil stocks at WallStreetNewsNetwork.com, there are almost half a dozen Brazilian telecom companies that pay yields in excess of 1.5 percent.
Across Latin America, there is a fierce struggle for market share going on—and this is where the early-in opportunities come into play.
Here are our Top 5 Picks in the Latin American telecommunications explosion:
#1 América Móvil (NYSE:AMX)
This is the baby of Mexican billionaire Carlos Slim. America Movil’s wireless division, Telcel, dominates mobile number porting across Latin America. And in this game, it trounces even AT&T.
The catalysts for this company keep rolling in. By the end of this year, Slim expects to roll out a 4.5G network in parts of Mexico, and 5G by 2020. This is where the real growth in this industry is, and America Movil’s got it in droves.
America Movil has so far invested around $52 billion in Mexico’s telecom sector alone.
Mexican internet use increased 5 percent just between 2015 and 2016, and some 85 percent of users are getting internet access through mobile phone devices.
Slim isn’t worth over $63 billion for no reason. He’s the 5th richest person in the world, and we recommend following his lead on this one.
If you want to get in on the purest profit in this industry—in the fastest way possible—this company represents a niche segment that is off the radar even though it’s about to explode.
This is the independent cell tower niche. It’s the backbone of the wireless revolution, and there’s NO competition.
The first three rose to a combined market cap of over $100 billion in the first phase of this evolution. Tower One is set to be the next to cash in.
So far, South America has only 100,000 towers, and it needs 520,000 towers in the next three years to accommodate demand and growth by the telco giants.
This is a brilliant segment niche, because these cell tower owners simple build towers and then rent them out to wireless providers. A single tower can serve up to 4 telcos, and then the tower owners just sit back and enjoy pure profit and continuous cash flow. And the other big three in this niche have no advantage over Tower One because they are all starting from scratch, so the real ‘in’ her is the cheapest avenue for the investor. This is a level playing field, unlike the wireless providers where competition is fierce.
Tower One is the only small-cap entry point into this industry. It was established in 2015 and has a market cap of only $15.40 million.
#3 Regal Beloit Corp (NYSE:RBC)
Since we’re already thinking outside the box in the wireless space … This is another lesser-known part of the equation that makes the wireless revolution possible—direct current (DC) power systems.
And they are experiencing massive growth thanks to the exploding hunger for mobile and fixed broadband networks around the world. The next big way in the telecoms industry is 5G networks, and DC power systems make them happen.
This market generated $3.92 billion in 2016, according to Frost & Sullivan, and is projected to reach $4.41 billion by 2021. That’s a compound annual growth rate of 2.4 percent.
RBC has added 2.2 percent since in the month since its last earnings report, and it continues to outperform the market.
#4 Telefonica Brasil SA (NYSE:VIV)
This is our counterintuitive pick on this list. For the last three months, the price performance here has been depressed and we’ve seen the stock lose over 2.5 percent even though this industry is gaining. This giant subsidiary of Spanish telecom major Telefonica SA (TEF) is a key ruler of the wireless market in Brazil, and one of the biggest catalysts is its Vivo commercial brand.
We like the drive here to roll out new tech and major investments and upgrades that have gone into new technology. But it’s a highly competitive playing field that has had some investors cast doubts on this stock. If you’ve got it already, it’s probably a good idea to hold onto it. This company has demonstrated a great ability to sustain its competitive edge and both move and move WITH the market.
The total mobile subscriber base, as of Q1 2017, is nearly 74 million users, and the trend for this company is a continued increase in subscribers, as recent months have shown.
Carlos Slim’s AMX will give it a run for its money in Brazil—and AT&T might also.
#5 TIM Participacoes S.A. (NYSE:TSU)
This stock has been a huge mover lately. TSU (or TIM Brasil) covers Brazil with cellular service, with help from two subsidiaries. It’s the biggest system operating in the country and has over 51 million subscribers. It’s also the Brazil subsidiary of Telecom Italia.
TIM Brasil closed the first quarter 2017 with over 61.9 million mobile lines. It also gets to boast being the first mobile operator deployed in every single state in Brazil, giving it a clear growth advantage. It’s now THE Number 1 provider of 4G coverage in the country and it’s 4G and fiber networks cover nearly 71,000 square kilometers.
This is one of the fastest movers in Brazil.
Honorable Mentions in the Wireless Space
BCE Inc. (TSX:BCE): This Canadian telco giant has three massive segments, including Bell Wireless, Bell Wireline and Bell Media. It’s paying a quarterly dividend of $0.7175 per share right now. It’s had some great results, even if net income has declined a bit in the most recent quarter. It’s still blowing other telcos out of the water.
Quebecor Inc. (TSX:QBR): There’s a huge catalyst with this one, if it’s not too late already. The company’s subsidiary, Quebecor Media Inc. just sold seven spectrum licenses to major Shaw Communications in a CAD$430-millio deal.
Mitel Networks Corp (NASDAQ:MITL) (TSE:MNW): This might seem like a riskier option right now, but no risk … low reward. The stocks have been doing pretty well lately, but everyone’s keeping a close eye on sell-offs. This company has a CAD$900+-million market cap, with a 52-week high of CAD$8.52 and a 52-week low of $5.81. Wall Street analysts are predicting that Mitel will report earnings per share of $0.15 in their quarterly report.
Intrinsyc Technologies (TSX:ITC): This is one of the more interesting bets, and it’s a longer-term play. When it comes to innovative technology, ITC is definitely in pole position for riding the wave. They provide hardware, software, and design and development engineering services that enable everyone to get new internet products to market—faster. Even more interesting, ITC is a license of another major player you might not have heard of in this space … (our next pick). (P.S.: This stock has doubled over the past few quarters, and we still think it’s undervalued).
Norsat International Inc. (TSX:NII): This is a Vancouver-based satellite communications company based in Richmond, British Columbia, Canada. This one is in the spotlight right now because it’s the subject of a controversial takeover bid by a Chinese company. But it’s got another offer, from an American investment fund that values the company at CAD$67.3 million.
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