ERIC - Investing in Mobile Technology

From phone calls to texting to shopping online, mobiles have redefined the way people communicate over the last three decades. With new form factors like foldable phones and 5G networks, the mobile industry is poised for more growth in the coming months and years.

The term mobile has a broad meaning and, as Oxford Dictionary defines it, the word could relate to devices like mobile phones, handheld computers and other similar technologies.

With that in mind, here the Investing News Network provides a comprehensive look at mobile investing with an overview of the subject, where it is headed in the future and, of course, ways to investing in mobile technology.

What is mobile?

As noted, the definition of mobile covers a wide platform due to the evolution of technology; it covers everything from mobile phones to handheld computers and everything in between like smart watches.

Ever since the first handheld mobile was unveiled in 1973, mobiles have seen a rapid evolution in terms of its form factor, including size and shape, to its abilities of what can be done on a device.

While the first phone offered 30 minutes of talk time and eight hours of standby time, devices that have been unveiled over the last several years promise up to single day of standby time. In February 2019, Avenir Telecom (EPA:AVT) under the Energizer brand demonstrated the evolution of mobile as it introduced Energizer P18K Pop that featured up to 50 days of standby time, which translates to the phone staying on for 50 days if not used.

Over the course of the last three decades, mobiles have also seen an evolution in other areas like the the form factor as manufacturers tried to make the devices portable. While the first generation mobiles were called brick-like phones, manufacturers introduced devices like the flip phones and sliders which made mobiles more compact. The launch of Apple’s (NASDAQ:AAPL) iPhone accelerated the move towards touch only device while the company’s iPad, created a “revolution” in the tablet arena.

In February 2019, mobile manufacturers showcased the future of smartphones as they unveiled foldable devices which as compared to the brick like first generation phones, features foldable screens with slim bezels.

Samsung (LSE:SMSN) and Huawei unveiled foldable phones which are set to be commercially available sometime in 2019. Others like Xiaomi (HK:1810, OTC Pink: XIACF), TCL and Oppo have also shown their own versions of foldable phones that are tipped to be launched in the coming years. The trend of foldable phones could be here to stay as Apple is also said to be working on a foldable device based on its patent filing.

In simple terms, foldable phones has married the concept of a tablet and a mobile phone into one single device.

Each manufacturer has their own version of folding phones and, accordingly, the purpose of such device varies with the manufacturer.

According to Huawei, the new form factor “revolutionizes both productivity and entertainment experiences on a mobile device.” On the other hand, Samsung said that its foldable phone offers new ways to multitask that the company says, “bringing to life new experiences and possibilities years in the making.”

While the folding phone space has seen the entry of multiple players, the crown for the first foldable phone goes to Royole FlexPai, which was introduced in October 2018.

Meanwhile, Nubia, an associate of ZTE (SHE:000063, OTC Pink:ZTCOF) unveiled Nubia Alpha at the 2019 Mobile World Congress that combined the characteristics of a smart watch and a smartphone into one category.

On the lines of Apple Watch and Samsung Galaxy Wearables, the Nubia Alpha does most things a smartwatch can do, including monitoring the health to features of a smartphone like making phone calls, and taking pictures.

Evolution of mobile

While the first generation phones offered nothing more than phone calls, mobile technologies has so evolved in recent years so much so that calls are no longer in the top 10 daily uses.

Just like the way, the form factor of a mobile evolved over the years, mobile manufacturers introduced new features that enabled mobiles to do more than the phone calls.

Blackberry (TSX:BB) with their 850 model in 1999 supported email and HTML browsing paving way for mass data evolution on smartphones. The launch of iPhone in 2007 signalled the dramatic shift to apps and the touch revolution.

In September 2017, a survey conducted by mobiles.co.uk revealed that texting had topped the charts in terms of a daily use of a mobile with 88 percent of people voting in its favor.

Checking email, Facebook (NASDAQ:FB), camera and reading news formed the top five while online shopping and banking were featured in the top 10 uses of smartphones. At 42 percent, watching videos on YouTube was also listed as one of the daily uses of smartphones.

It should come as a no surprise that people have rediscovered the use of mobile as apps have dramatically changed the abilities of a mobile phone. Ericsson (NASDAQ:ERIC) in its mobility report for February 2019 highlighted that voice traffic, which registered 347 monthly minutes of use (MMOU) per subscription in 2018, would post a compound annual growth rate (CAGR) of 0.7 percent between 2018 and 2024. In comparison, Ericsson said that the mobile data traffic in the same period is set for a CAGR of 30.9 percent.

The shift to the digital space has been felt across many industries, including the banking industry. For example, the Royal Bank of Canada (TSX:RY) revealed in June 2018 that it will put more focus on its digital platform in the coming years. With more people switching to its mobile banking app, the Royal Bank is looking to cut its physical banking space by 20 percent in the next five years.

According to App Annie, there has been over 194 billion app downloads in 2018 with more than US$101 billion spent by consumers on worldwide app stores. The firm also said that there has been a 360 percent higher average initial public offering (IPO) valuation for those companies that had mobile as a core focus in 2018.

Crucially, App Annie said that the consumer spend on apps on global app stores have increased 75 percent from 2016 levels while the time spent in apps went up 50 percent in 2018 compared to 2016 levels.

The firm noted that an average consumer in countries like the US, South Korea, Japan and Australia have over 100 apps on their smartphones. App Annie said that the Generation Z or the people in the 16 to 24 year age demographic use mobile as a “second nature” for all forms of their life which includes communication, socializing, shopping and banking. The firm said that the term mobile is “non negotiable” to any business that is hoping to attract this demographic.

In a separate report published by Ericsson in November 2018, the company highlighted the apps that drove the mobile data traffic with video topping the charts and accounting for 60 percent of the total share. Social media apps accounted for 11.1 percent of mobile traffic followed by web browsing and software update at 4.5 percent each. Audio and file sharing apps accounted for 1.9 percent and 1.2 percent mobile traffic respectively.

Future outlook

In December 2018, the International Data Corporation (IDC) said that smartphone shipments are expected to be of single-digit growth between 2019 to 2022 to reach 1.57 billion units in 2022.

The firm said that smartphone shipments at the end of 2018 declined three percent to 1.42 billion units as compared to 1.47 billion in 2017.

Between 2019 and 2022, IDC said that the growth of emerging markets, along with 5G and new product form factors, will aid in the growth of the smartphone market.

Ericsson highlighted in a report the massive potential of 5G, predicting that industry digitalization investments will generate an estimated US$619 billion revenue opportunity for telecom operators by 2026.

Further, Ericsson said that telecom operators can pocket an additional 36 percent in revenue potential by 2026 from 5G-related market opportunities.

Additionally, a Counterpoint report published in February 2019 said that the smart feature phone market presented a US$28 billion opportunity in the next three years.

The firm highlighted a United Nations goal that focused on providing affordable access to the internet in developing countries by 2020. Counterpoint added that 34 percent of the world’s population is not subscribed to the internet and that 57 percent of people do not use mobile internet access.

“To address the digital divide, industry stakeholders have developed a new category of device, “smart feature phones” that are powered by optimized software platforms that support internet applications and internet services within a feature phone form-factor,” Counterpoint said in the report.

In terms of the apps driving the future mobile traffic, Ericsson projects video apps will continue to dominate the market as they are estimated to contribute 74 percent of total traffic in 2024. The firm said that these apps will register a CAGR of 36 percent between 2018 to 2024.

Furthermore, social media apps are set to grow at a CAGR of 24 percent between 2018 to 2024 and account for eight percent of total mobile traffic.

Ericsson also predicted that the next generation mobile network, 5G will account for 1.9 percent of mobile data traffic in 2020 before scaling up rapidly by 2024 where it will have a share of 25.4 percent.

Investing in mobile technology

With such growth predicted across the mobile market, investors have plenty of opportunities to invest in the sector, including:

• Exchange-Traded Funds

For those new to the space, ETFs are popular way for investors to consider as they provide investing opportunities to an entire industry rather than a specific company.

In the telecom space, ETFdb.com lists 10 ETFs including Vanguard Communication Services (ARCA:VOX), iShares MSCI Russia (ARCA:ERUS), Fidelity MSCI Communication (ARCA:FCOM) and iShares Global Telecom ETF (ARCA:IXP). For those interested in smartphone manufacturing companies, there’s First Trust NASDAQ CEA Smartphone Index Fund (NASDAQ:FONE).

• Stocks

Investors seeking to invest in a specific company can look at smartphone manufacturers like Samsung (LSE:SMSN), Apple (NASDAQ:AAPL), Xiaomi (HK:1810, OTC Pink: XIACF) and Lenovo (HK:0992, OTC Pink:LNVGF) as these companies occupy the top spots in terms of smartphone shipments for Q4 2018.

Additionally, investors in the US can also look at the largest telecom companies like AT&T (NYSE:T) and Verizon (NYSE:VZ) while those in Canada can look at the “popular” companies like Rogers (TSX:RCI.B, OTC Pink:RCIAF), Bell (TSX:BCE), Telus (TSX:T) and Shaw Communications (TSX:SJR.B).

Is there any category of mobile that interests you? Let us know in the comments.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.