There are eight major telecommunications companies listed on the ASX. There are the big two phone providers Telstra Corporation Ltd (ASX: TLS) and Optus owner Singapore Telecommunications Ltd (CHESS) (ASX: SGT), second-tier ISPs TPG Telecom Ltd (ASX: TPM), M2 Group Ltd (ASX: MTU) and iiNet Limited (ASX: IIN), and smaller players Amcom Telecommunications Limited (ASX: AMM), My Net Fone Limited (ASX: MNF) and Vocus Communications Limited (ASX: VOC).
This list will be soon trimmed to 7 with the combination of Vocus and Amcom, but what does 2015 hold for these top stocks?
Telstra is increasingly diversifying away from the mature consumer mobile and internet market in Australia, where it already holds a dominant market share. The company is investing in a number of overseas and local tech companies that it hopes can provide some diversification and growth to the company outside of the NBN. Analysts are not expecting growth in earnings per share this financial year.
Optus is in a tricky spot in that it doesn't have the best or dominant service and relies heavily on third party resellers to maintain market share at lower margins. Analysts aren't expecting much growth from the company but it is working hard to wrestle some market share back from Telstra.
TPG and M2 are two of the most interesting companies in the sector as they are consciously doing things a little differently in order to grow earnings and marketshare. TPG is investing heavily in fibre networks that will strategically compete with the NBN, while M2 is attempting to retain and grow its customer base by introducing a raft of bundles that offer a combination of home and business phone, internet, and energy plans. M2's strategy is capital-light, on-selling the services of other companies, while TPG's strategy leaves it open to regulatory challenges.
iiNet has taken an acquisition strategy to now hold the position of the third largest ISP in the country. The company is expected to benefit from a more even playing field with the NBN rolling out and unlike competitors has generally maintained pricing rather than pursuing market share. iiNet has a good name and offers a quality service, which is helping to retain customers, and has recently launched a low-cost model to compete with M2's Dodo.
Finally, My Net Phone, Vocus and Amcom offer significantly different services to the others, including Voice-Over-IP, business data centres and connectivity options, and high-speed data services.
Vocus and Amcom are expected to be two of the higher growth companies in the sector and analysts believe the combination of the two to be good for shareholders. With fewer competitors and a dominant marketshare, these two companies have to be among the best options in 2015.
