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Telstra is 4G-ing ahead

The telecommunications sector of the market is smoking hot, led by Telstra which burst back through the $5 per share mark this week.

The vast number of people being led around by smartphones and tablets is nothing new but the technology behind the devices is getting quicker and cleverer all the time.

Telstra has built its new 4G mobile network utilising its existing spectrum, but once it acquires more new spectrum in the government auction of the now vacated television spectrum, it will really begin to wield the real power of the 4G technology.

That hasn’t prevented more than 2.1 million devices connecting to Telstra’s new network since it launched in 2011. Most of these devices are mobile handsets with tablets, dongles and wi-fi hotspots making up the balance.

Every time a manufacturer like Samsung or Apple launches a new handset or tablet, sales surge and so do connections. As Telstra will have more than two-thirds of the country covered by its network by June this year, it is proving more popular than its competitors, which is further fuelling demand for the company’s services.

The growth in mobile communications has been the primary reason behind Telstra’s popularity with investors. But it has also been due to the relative peace between the company, the industry regulator and the government since it completed a deal on the National Broadband Network in March last year.

At that time, Telstra’s share price was $3.23. Oddly, this is exactly the same price as when David Thodey was appointed as the chief executive almost four years ago on 8 May 2009.

The real spurt in the share price has been since the NBN deal was finalised last year, helped along by Telstra’s steadfast commitment to a full year dividend of 28 cents per share and a promise to increase it when it has accumulated more franking credits.

Yet even now that the share price has tip-toed through the $5 mark, the gross dividend yield (including franking credits) is about 8.0%, which compares favourably against the average bank yield of 7.3%.

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