2 growing telcos you need to own

These two growing telcos are set to see surging demand for their products.

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A small investment in the two companies outlined below could turn into a small fortune over the next five to ten years as both companies continue to experience rapid growth. Outlined below is why I think both these companies would be a smart addition to all growth investors' portfolios.

1. Vocus Communications Limited (ASX: VOC)

Vocus has seen its share price increase by a huge 1,000% over the past five years and 142% over the past 12 months. However, there appears to be plenty more growth to come. Vocus is a leading provider of wholesale and corporate telecommunications services in Australia and New Zealand, providing internet, fibre, ethernet and data centre services.

Vocus has managed to grow revenue and earnings at a staggering compound annual rate of approximately 50% over the past three years. It continues to experience strong customer growth, growing from 133 customers in 2010 to 1,126 in December 2013, which equates to a compound annual increase of 85%.

Because Vocus' cost base is predominately fixed, the majority of revenue earned from additional customers will fall directly to earnings. Further, Vocus has stated that it expects capital expenditure to decline over the coming years after peaking in FY2013, and therefore it is set to benefit over the coming years from a large capital spend in FY12 and FY13.

Despite trading on a price earnings ratio of 68 times FY13 earnings, Vocus looks set to grow strongly over the next five years.

2. Amcom Telecommunications Limited (ASX: AMM)

Amcom operates high-speed fibre-optic networks in Western Australia, South Australia and the Northern Territory. Amcom also provides hosted cloud and IT services to corporate customers, predominately to small to medium-sized businesses. Amcom has grown net profit from $10 million in 2010 to $21 million in 2013.  Amcom expects earnings growth in the short term to come from its ability to leverage off its existing network and cross-selling into additional services.

Further, over the longer term, demand for Amcom's fibre network will grow strongly as network traffic increases. Amcom expects double-digit percentage growth in net profit for FY14, and with the shares trading on a price earnings ratio of 22 times FY13 earnings, it looks good value.

Motley Fool contributor Bradley Murphy does not own shares in any company mentioned in this article. 

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