Smartphones have become increasingly popular in recent years. Aside from functioning as mobile phones, these devices have many computer-like functions, including Internet access and email.

The smartphone market is highly competitive. Two large cap stocks, Apple and Research in Motion, are the dominant players. However, other firms, such as Motorola, Palm and Garmin, have introduced new smartphones in recent months, as well.

Look to wireless carriers for smartphone profits

We think that one of the best ways for investors to profit from rising use of smartphones and other wireless devices is through wireless carriers. Many are large cap stocks that have more revenue sources than smartphone makers. Aside from wireless operations, these may include traditional phone, Internet and TV businesses. This diversity lowers their reliance on a single device.

In the current issue of Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, we take a close look at AT&T (symbol T on New York). This large cap stock’s wireless division has over 80 million customers across the U.S. That’s nearly double the size of its traditional-phone operations.

AT&T is benefiting from the iPhone

AT&T has been the exclusive U.S. carrier of Apple’s iPhone since 2007. The device continues to attract huge numbers of new subscribers: In its most recent quarter, AT&T added a record 3.2 million new iPhone users. About 40% of these customers were new to the company.

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AT&T is ready for new iPhone carriers

AT&T’s deal with Apple expires next year. While it’s likely that Apple will then let other carriers sell the device, we still feel that AT&T will continue to profit from the iPhone long after its deal with Apple ends. That’s because iPhone users must sign a two-year contract, and it’s likely that AT&T will use discounts on other services to entice many of them to stay on.

As well, Apple demands higher fees from carriers than other phone makers. Some of AT&T’s rivals may be reluctant to absorb these extra costs.

We’ll continue to keep an eye on AT&T and other major U.S. carriers in the fast-changing wireless market and update our buy/sell/hold advice accordingly in our Wall Street Stock Forecaster newsletter. Click here to learn how you can get one month free when you subscribe today.