The Hidden Gem Amongst Mobile Stock PicksThe global mobile phone market is massive. There were a staggering 6.8 billion mobile subscriptions at the end of 2012, according to The International Communication Union. (Source: “Global mobile statistics 2013 Part A: Mobile subscribers; handset market share; mobile operators,” mobiThinking, last accessed August 22, 2013.)
The numbers are huge and even though the number represents about 98% of the earth’s population, we all know that there are still billions who don’t have mobile accounts, including those in the emerging markets.
Once the rural areas have the infrastructure to support mobile networks, I expect the numbers to surge for the emerging markets.
In fact, the potential for mobile phones is huge in the emerging markets, where consumers are seeing a rise in their income levels as the global economy connects. (Read “The Only Way Apple Will Survive the Cutthroat Mobile Market.”)
According to the report, to no one’s surprise, China is the largest mobile market in the world, with 1.15 billion mobile subscribers at the end of 2012, followed by India at 699 million and the United States at just under 322 million. And there are many emerging markets available for growth.
A communications company that works to funnel out these potential subscribers in the emerging market is Netherlands-based VimpelCom Ltd. (NYSE/VIP). With a market capitalization of close to $19.0 billion, the company is not small, but it is much smaller than a company like Verizon Communications Inc. (NYSE/VZ), which has a market cap of $136 billion.
VimpelCom holds licenses to sell wireless, fixed, and broadband services in emerging markets, including Russia, the Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Vietnam, Cambodia, Laos, Algeria, Bangladesh, Pakistan, Burundi, Zimbabwe, Namibia, and the Central African Republic. The company also operates in Canada and Italy.
According to the company, its subscriber base stood at 214 million mobile subscribers at the end of 2012.
VimpelCom Limited Chart
Chart courtesy of www.StockCharts.com
Revenues doubled from $10.52 billion in 2010 to $23.06 billion in 2012, and the growth is estimated to continue into this year and 2014 (albeit, at a rate that needs improvement).
At just above its 52-week low of $9.56, I feel VimpelCom has good long-term capital appreciation potential for those of you patient enough to hold the stock. Of course, you will need to make the evaluation yourself before deciding whether VimpelCom is a viable investment.
Moreover, the stock pays a nice dividend of $1.40 annually for a current dividend yield of 12.9%. However, with a net debt of just over $24.0 billion, I’m not sure if you can depend on these dividends. The one thing about VimpelCom, though, is that the company could offer a good risk-to-reward mobile play in the emerging markets.
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