Spain Joins the Next Generation

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Hello, Spain? Say hola to your first LTE mobile network.

Local mobility hero Telefonica (NYS: TEF) just launched a couple of pilot LTE networks in the metroplexes of Madrid and Barcelona. No handsets in this market are currently able to handle LTE signals, so these 100-megabit connections will only work with USB adapters at first. But hey, Sprint Nextel (NYS: S) and Verizon (NYS: VZ) got their next-generation networks started that way, too.

LTE and WiMAX trials and early rollouts are a dime a dozen these days, but this particular project is notable for two reasons:

  • Through its O2 and Movistar brands, Telefonica is a global giant that needs to get its LTE act together -- stat! You can't just sit back and let France Telecom's (NYS: FTE) Orange or the eponymous Vodafone (NAS: VOD) service steal worldwide market share while you're working out the technical details.
  • Spain just happens to be a very interesting bandwidth market, full of challenge and opportunity. When Netflix (NAS: NFLX) rolls out its video-streaming service there, it'll face off against one of the most notorious piracy hotbeds in the world. So ultrafast connections should be welcomed with open (but dirty) arms, mobile or not. Also, Spain just might be the next Greece. Putting consumer demand to the test in a thoroughly challenged economy can be a heck of a steel bath -- what doesn't kill you makes you stronger, right?

The geopolitical challenges of working from a Spanish base are keeping Telefonica down: Shares are selling for less than seven times trailing earnings, cheap even for this low-growth but cash-rich industry. Moreover, low share prices boost an already generous dividend yield and the company also benefits from its strong presence in growing Latin American markets.

If I had any dry powder today, I'd take a closer look at Telefonica. The stock looks like a brilliant buy thanks to the combination of a spring-loaded stock price, tremendous dividend payouts, and a firm grasp of next-generation products and services.

Telefonica and many of its mobile peers surely belong on your watchlist, if nothing else:

At the time this article was published

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