Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



AT&T and Verizon Want You to Make Calls in the Air

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It doesn't happen very often, but a whole new market is opening up if the Federal Communications Commission has its way. Air travelers may soon be able to make phone calls and use cellular data while flying on commercial airlines. 

While some flight attendants and passengers may not like it, some companies will. Their investors might want to dial in too.

Sonic boon?
Wireless carriers such as AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) have had to be creative over the past several years in order to grow their businesses. The companies have been buying spectrum, buying each other, and offering new services.

Now, a new and potentially lucrative market, seven miles up, is opening thanks to the FCC. The boon to providers won't exactly be known. How many travelers will actually use devices up there? What will the infrastructure costs be?

Eventually, it is likely to be helpful to carriers. Air travel is expected to grow at an annual rate of 5% over the next two decades. Calls from 35,000 feet will probably be on the order of $3 to $4 per minute. A typical business call lasting one hour could cost around $200. Some of that money will eventually find its way to the carriers. 

With the proliferation of smartphone and tablet use -- two brand new markets created in the recent past -- revenue at both AT&T and Verizon has been trending higher, although at a relatively slow pace.   

T Revenue (TTM) Chart

T Revenue (TTM) data by YCharts

Merger mania
The boost from wireless use in the air will complement what is happening on the ground. The big players have been jockeying for position. Verizon wanted all the profits for itself and bought the 45% portion of Verizon Wireless that was owned by Vodafone  (NASDAQ: VOD  ) . The $130 billion deal should close early in 2014 and provide a boost to Vodafone and investors. 

Vodafone will use some of the proceeds to upgrade its European infrastructure so it can distance itself from competition. However, most of the funds will be returned to shareholders.

Shareholders could get another gift next year -- rumors abound that AT&T, in a bid to expand internationally, would like to buy the European operations of Vodafone in a mega deal worth around $175 billion, dwarfing the $130 billion Verizon-Vodafone transaction. 

Verizon will have to deal with the enormous debt it took on after buying out Vodafone. The company issued $50 billion in new bonds to help pay for the majority of the cash portion of the deal. Whether the debt strangles Verizon growth going forward remains to be seen. So far, Wall Street seems alright with it. Verizon shares have risen about 8% since the buyout was announced.

Foolish conclusion
It is likely that air passengers will soon be able to talk and text at 35,000 feet using their AT&T and Verizon plans. This will open up a new market for the big carriers to complement the growth achieved through mergers and acquisitions.  

I'm looking for the next big market for wireless. Under the sea? In outer space?

Win the war without fighting
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2741014, ~/Articles/ArticleHandler.aspx, 9/28/2016 1:18:22 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:00 PM
T $41.46 Up +0.32 +0.78%
AT and T CAPS Rating: ****
VOD $29.27 Up +0.20 +0.69%
Vodafone CAPS Rating: ****
VZ $52.49 Up +0.34 +0.65%
Verizon Communicat… CAPS Rating: ****