One of the hottest growth sectors in Australia is telecommunications and mobile data as people spend ever more time glued to their smartphones. This has made the environment competitive with dozens of businesses on the ASX looking to cash in on the growing demand for cost effective smartphone plans.

One small operator that offers budget mobile and data plans on prepaid SIM cards over the Optus mobile network is Amaysim Australia Ltd (ASX: AYS).

Its SIM card, data, text and talks offers are gaining popularity as it helps save customers cash and offers the flexibility of no potentially expensive long-term lock-in contracts.

As at the end of December 31 2015 the company had 764,000 subscribers, which was up 12.5% on the prior corresponding period (pcp). Over the period the group also posted underlying EBITDA of $12.6 million on revenues of $117.3 million. The adjusted EBITDA (backing out one-off costs) was up 173% on a pro forma basis, with revenues up 17.9% on the same basis.

The headline numbers are impressive and another key metric to watch for mobile phone plan retailers is average revenue per user (ARPU). This metric is important as mobile plans are a competitive space with large rivals like Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPM), Optus and Vodafone all offering cheap price plans in a bid to win market share.

For the six months ending December 31 2015 Amaysim managed to lift its statutory ARPU to $26.35, compared to $25.16 in the pcp. However, investors should note that the underlying subscriber growth rate slowed over calendar year 2015 compared to 2014.

The business has an entrepreneurial management team, healthy balance sheet, good brand, and fills a gap in the market for easy smartphone use for temporary visitors, students and many other Australian residents seeking hassle free mobile usage.

It is also increasing online sales of its SIM cards that helps save on costs and complements the retail distribution network that covers many of Australia’s main convenience stores.

In January 2016 it added another 140,000 mobile subscribers when it acquired the Vaya budget mobile business and management expects to meet forecasts for total subscriber numbers of between 960,000 to 980,000 by the end of June 30 2016.

Shares sell for $1.87 and the company delivered underlying earnings per share of 4.6 cents in the first half, which means it trades on around 20x annnualised earnings per share. It also paid out 3 cents per share in dividends for the first half with a targeted payout ratio of 70% of underlying NPATA. This would place it on an annual yield in the region of 3.5% based on realistic expectations for full year profit.

It certainly looks a business for the top of the watch list and potentially one for the portfolio if it is able to demonstrate renewed strength in subscriber growth over the next 12-18 months.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.