With AT&T in the States and Telus in Canada offering very high dividend yields, it is difficult for a dividend investor to ignore them. However, a recent experience I had in Berlin, Germany convinced me that now is not the time to be investing in telecommunications companies like these big incumbent behemoths. The reason was on my iTouch.
I am an expat living in Norway and due to vacation allowances and the opportunity for my children to spend time with their grandparents back in Canada, my wife spent much of July in Canada with the kids while I continued to work in Norway. To break up the weekends without the family with me, I decided to take a trip to Berlin. Wanting to speak to my wife and kids everyday was still important. However, if anyone has ever spent any time in a hotel you know that hotels totally rip you off on phone calls. Add on the fact that I would be calling international - you can guess how expensive those calls would be. I thought of calling cards but that is always such a pain. Then it dawned on me that awhile ago I downloaded the Skype app on my iTouch (not iPhone!) and thought I should give it a try.
I went to my nearest Starbucks (near Checkpoint Charlie which was interesting in its own right) ordered a Latte and asked for the free wifi access. I got my iTouch all configured on their network and immediately went to the Skype app. I realised quickly that since I would be calling me wife on a landline phone, I would need to buy some credits that would allot me time on Skype to do that. Skype is totally free for computer to computer calls, but not from computer to landline. However, that process was very easy and I put $15.00 (US) on my account, not knowing how much I would actually need.
The next step was the most exciting part. I used my iTouch - a device that does not have a phone built in - to make a call to my wife 8000 kilometers (4600 miles) away in another country to our phone at the cabin. I was expecting that since this was my iTouch and I was using the Starbucks wifi that the quality would be only ok, but I was really surprised when she picked up the phone and it sounded pretty good. Not perfect, but really good considering what I was doing. We had a 15 minute conversation and it cost me about $1.00. Crazy.
Ok, now back to what this means to dividend investing. It means that there are serious threats against these large incumbent telecommunications companies and they are going to be in the fight for their lives in the coming years in my opinion. Not even looking at financials, the fact that I was able to make an international call using a device other than a phone over a wifi network really encroaches upon their market. Even considering the fact that these companies often own and supply the internet access, the threat is still huge.
When analysing a company you need to look at the macro-factors taking place in an industry to decide if it is worth putting your money into it. This example was evidence to me that telecommunications is in trouble and I will focus my money elsewhere.
This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.
2 days ago
