With smartphones and devices such as Apple’s new iPad creating strong growth and leading the way in industry-disrupting technology, the telecom industry has been forced to respond with what has now become an overriding trend — the convergence of communications, computing and entertaining, and the subsequent restructuring of the industry along horizontal lines.
“These new [smartphone] devices are seeing amazing innovation in applications because they are not controlled by the service providers. The best example of these trends are in devices like the Droid, the Samsung (SSNLF) Galaxy and Apple’s (AAPL) iPad and the iPhone,” explained Timothy Horan, a managing director at Oppenheimer & Co., Inc. Horan predicts traditional IP and video applications will continue to cannibalize any additional wireline and wireless broadband capacity rolled out over the next several years, driving competition and forcing companies to become more horizontally focused on specific consumer bases.
The analyst specifically recommends companies Comcast (CMCSA) and American Tower (AMT) as his top picks.
“As [these companies] work through a lot of these changes and are benefiting from the convergence between this sector, computing and entertainment, I think many companies that are more horizontally focused are going to be very good longer-term investments,” Horan said. “In the near term, smartphones and new devices like the iPad are created strong growth. This is going to put a lot of pressure on the wireless networks that give them a little bit more pricing power.”
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