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Here’s why Australia’s telecommunications sector is firing up today

Australia’s telecommunications sector is full of energy today following the announcement that TPG Telecom Ltd (ASX: TPM) would acquire smaller rival iiNet Limited (ASX: IIN) for $1.4 billion. While the pair have each delivered double-digit gains today (14.7% and 25% respectively), plenty of other telecommunication stocks are also buzzing on the news.

The three most notable movements have come from M2 Group Ltd (ASX: MTU), Vocus Communications Limited (ASX: VOC) and Amcom Telecommunications Limited (ASX: AMM), which have risen 3.6%, 7.6% and 5.8% respectively.

Ironically, the deal between TPG Telecom and iiNet could actually be detrimental to the three companies in that the synergies achieved will enable the combined entity to reduce costs and increase its broadband customer base, thus making it more of a competitive threat.

However, it’s possible that M2 and Vocus are jumping based on speculation that they could be next in the merger and acquisition queue.

While Vocus and Amcom are already joining forces, further mergers could make sense. Combined, all these new entities could start to challenge Telstra Corporation Ltd (ASX: TLS), the heavyweight of Australia’s telecommunications industry.

Also, all of these companies are in an excellent position to profit from the data boom.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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