Telecommunications and internet companies always need to adapt to offer new services as well as keep customers happy with current service provision. If a business doesn't want to become a simple internet utility company with small margins, it has to be just as smart with new technology as with marketing.
Investors in this space also have to be a little tech savvy and understand what will propel earnings. Here are two telecom companies that are making changes for the future.
Telecom Corporation of New Zealand Limited (ASX: TEL) recently sold its AAPT internet service provider business to TPG Telecom Limited (ASX: TPM) for $450 million. The company plans to expand communications, entertainment and IT services through cloud technology and systems.
It is planning to launch a new internet TV business later in 2014 and has joined up with the US web music service Spotify to offer customers access to global music through it mobile packages.
In the last six months, the company's shares are up about 19% to $2.46. Its interim net profit was up 2.5%, although revenue was down 3%.
Australian telecom giant Telstra Corporation Ltd (ASX: TLS) has been busy selling down non-core businesses like Sensis to put together a sizeable war chest for acquisitions and international expansion.
Another thing that may keep cash regularly flowing in is the National Broadband Network. The company will be leasing out the use of its established telecommunications network for the roll out and operation of the NBN. It's estimated that payments to Telstra could be about $400 million annually and rising periodically as far out as 2067.
After rising steeply until May 2013, the share price has been ranging at a high level and is up about 3% in the last six months. Its PE is 16.4, at the top of its historical PE range.
Foolish takeaway
I prefer Telstra over Telecom Corporation because of the overseas growth potential and the telecom network leasing income stream that can help finance further acquisitions and business expansion.
