In case investors are in any doubt over who’s been boosting their profits from Australia’s insatiable appetite for mobile calls, wireless connections, internet, broadband and data usage, the chart below paints a pretty clear picture.
Over the past five years, Telstra (ASX: TLS) and the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) have increased by 25% and 33% respectively; meanwhile the following three smaller telecommunication players, by offering keener pricing options to customers and by expanding their networks through acquisitions and build-out of infrastructure, have recorded enormous surges in their share prices.
1. Amcom (ASX: AMM) is a Western Australian-based telco which presented yesterday at the Macquarie Connections WA Forum Conference in Perth. The company didn’t provide a copy of its presentation to the market which suggests there was no new information. However at Amcom’s August full-year results presentation, the telco told the market it was expecting double-digit percentage growth in net profit after tax for the current financial year.
2. iiNet (ASX: IIN) is also headquartered in WA and also presented yesterday at the WA Forum and did provide the market with a copy of its presentation. The presentation included an explanation of why the NBN is so attractive to iiNet. According to iiNet, the firm now has over 20,000 customers on the NBN, with over 60% of customer sign-ups new to iiNet. With the benefits of the Adam Internet acquisition still to flow through, the outlook for 2014 continues to be positive.
3. M2 Telecommunications (ASX: MTU) held its Annual General Meeting this week at which it provided shareholders with a breakdown of expected contributors to revenue for the 2014 financial year. Recent acquisitions have helped the company transition its business towards retail customers which are expected to account for 53% of revenues in 2014. M2 also reaffirmed that following the end of the first quarter the telco is still on track to meet its guidance for a 39% increase in earnings per share.
Source: Google Finance
While there are expectations that the form of the NBN will change under the new Coalition government, which obviously brings uncertainty for telco companies and investors, there are solid grounds for being positive about the outlook for small telco stocks to continue to grow their customer bases and increase both revenues and earnings no matter what the outcome of a renegotiated NBN.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.