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International Telecom Stocks to Watch in 2013

Our trip around the world signals which wireless carriers could make good investments.

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As we approach 2013, we took a quick trip around the telecom world and are offering our resulting updates on and insights into the current state of affairs in Canada, Russia, Brazil, and Mexico. After analyzing the economic, regulatory, and competitive landscapes in those countries, a few clear themes were evident. First, as penetration rates rise, mobile termination rates fall, and subscriber growth prospects wane, carriers around the world are slowly downshifting into a more rational and economically efficient mind-set. Second, governments around the world have become increasingly concerned about prioritizing the network quality for wireless services. Third, economic moats matter. Firms like  Rogers Communications (RCI),  America Movil (AMX), and  Mobile TeleSystems (MBT), with economies of scale, financial flexibility, and superior infrastructure, are the one that offer investors the sector's best prospects for return on investment.

Canada: Close to Consolidation
The regulatory landscape in Canada has been relatively benign of late. The rule methodology for next year's spectrum auction has largely been determined, although there will probably be a few tweaks made over the next couple of months. It's clear that each region will have four 700-megahertz spectrum blocks available, which essentially means there will be room for only one new entrant (to offer high-end service) in any given area. We find it hard to believe that new entrants will be able to remain as fragmented as they currently are, and it seems as if the firms are waiting each other out to see who runs out of cash first. Although the major incumbents aren't allowed to buy out the new entrants until 2014, we wouldn't be surprised to see some mergers and acquisitions over the next year, with Wind taking out Mobilicity the most likely scenario.

Imari Love does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.