Living in Latin America off and on over the past decade, I’ve witnessed how smartphones and broadband services have revolutionized the culture. I’ve also learned firsthand that emerging markets such as Latin America are great places for global telecommunications firms (as opposed to regional players) to grow their businesses, making them excellent long-term income investments.

Nearly four years ago, I landed at the main airport in Costa Rica to start a yearlong consulting assignment. On this trip, I was advising the CEO of a regional construction firm on the financing of a luxury condominium development, and also on how he could expand the firm’s services to make buildings more energy-efficient and eco-friendly.

Costa Rica means “rich coast,” and it is one of the most geographically and biologically diverse places in the world—a true tropical paradise.

Within a few hours’ drive of the capital, San José, you can visit either the Atlantic Ocean or the Pacific, climb a magnificent mountain, or walk through a rainforest. The wildlife is incredible, but I’ll save my story of coming face-to-face with a boa constrictor for another day. Rainforest biologists travel from around the world to places such as La Selva Biological Station, where they can study the bare-necked umbrellabird and chestnut-backed antbird.

But the country is also a perfect laboratory to study the profound transformation caused by smartphones and broadband telecom services. I would further argue that Costa Rica, the second-fastest-growing nation in Central America after its neighbor, Panama, is one of the best places to study emerging-markets business. It’s a model of growth and development in Latin America.

Bureaucracy in Paradise

When I was in Costa Rica in 2011, the privatization of its cell-phone market was only beginning. As in the rest of Latin America, government institutions controlled everything, from electricity and telecommunications to water utilities and insurance. In Costa Rica, the Instituto Costarricense de Electricidad, or ICE for short, was the monopoly electricity and telecom provider. And ICE was a fitting acronym for that institution, given it had frozen Costa Rican progress on many fronts.

There was a striking contrast between the entrepreneurial nature of the culture and the bureaucratic maze of the government. In those days, people said you had to wage a war of attrition against a long and tedious labyrinth of government offices and workers.

In fact, just paying a bill or getting service at the local branch of the state bank or phone company was an exercise in patience. I’d start those mornings with my café con leche in one hand and a book in the other, preparing to take a number and wait in line for hours in a system akin to a swamped Department of Motor Vehicles in the U.S. Private banks and alternative telecom services had just started to arrive on the scene, but most Costa Ricans were relegated to negotiating the state bureaucracy.

Back then, businesspeople were chained to their computers because early smartphone plans in Costa Rica were too expensive for the average person. Using a U.S. phone service there was no better—roaming charges could inflate a bill to the size of a mortgage payment. So, Apple and Android smartphones remained a privilege of the upper classes. Most of the population used old analog mobile phones sold by ICE, since payment plans that bundled the price of a phone with service didn’t exist as they did in the U.S. And a $500 phone was beyond the reach of most Costa Ricans, whose average annual income was $12,900.

Times Are Changing

Fast forward to 2013. I’m again on assignment in Costa Rica, as an adviser to an investment house on the development of a regional energy-infrastructure fund. This time, it’s like visiting a different country. During the years since my last visit, the government opened up the telecom markets to foreign competition, the result of various free-trade agreements enacted a few years before.

In 2013, the average Costa Rican had a choice of telecom services, the main providers being Claro Americas (owned by Mexican billionaire Carlos Slim’s company América Móvil) and Movistar (owned by Spain’s Telefonica). As recently as the end of 2012, the early days of competition, ICE still had a 79% stake in the mobile market. But its hold on the market started melting faster than a Costa Rican copo (shaved ice treat) on Brasilito Beach. A year ago, its share had dropped to 65%.

The changes covered every aspect of telecom. When foreign companies began offering payment plans on smartphones, a secondary market of phones started. Even the cheapest phone could make a broadband connection. I had three companies competing to offer me broadband services for my smartphone, with different levels of speed that were as fast or faster than those offered in developed economies (and at a much cheaper price). Regulators set a maximum on rates that was in line with the cost of living in Costa Rica, though the government is now considering allowing full price competition.

And the long lines at the bank and phone company are less common. Now the people can use their smartphones to bank and pay bills—and much more. You can go to the local pulperia (a Costa Rican convenience store) and, for a few colones (less than a dollar), buy a smart chip that plugs into your phone and links it to a broadband service. Can you do that at your 7-Eleven?

Cultures Are Changing, Too

And the culture has also transformed with the technology. On my last visit, Costa Ricans were schooling me on apps developed in the U.S., such as Waze, which can be used to plot a route around the traffic to the beach. And I was amazed how many people mentioned (in English, which is mandatory in schools, by the way) the latest bestsellers that they downloaded from Amazon.com to their Apple iPads. And, of course, everybody is socializing via Facebook.

How could these changes happen so quickly and so cheaply? These services weren’t homegrown; they came from global telecom players that were big enough to have economies of scale and techno­logically savvy enough to sell the world’s best services in emerging markets. No one-country player could match them.

These firms also operate in many developed countries, where they’ve developed the most advanced technologies. And as they’ve penetrated emerging markets, they have learned how to adapt their services to local tastes.

First World Service

My latest experiences with broadband and telecom in Costa Rica, as well as in Mexico last year, were no different than at home, in Virginia. This is only the beginning of a mass adoption of broadband and telecom services in emerging markets such as Latin America.

The number of smartphone users in Latin America will increase 28% in 2014, led by Brazil, Chile, Colombia, Peru and Venezuela, according to data analyst eMarketer. It predicts Brazil and Mexico will lead the pack, adding 10.9 million and 6.1 million users, respectively, in 2014. And the firm expects that more than 30 million Latin Americans will adopt smartphones each year through 2017.

In our Global Income Edge portfolios, we identify those telecom and broadband firms that will be at the forefront of these breathtaking changes in emerging markets, and are best poised to add millions of paying customers.

In our last issue, my colleague Bob Frick introduced readers to Vodafone (NSDQ: VOD), our number-one Best Buy in the Conservative Portfolio, which is positioned in high-growth emerging markets such as India, South Africa and Brazil. VODAFONE is a Buy up to $39.

Another telecom with great potential for earnings in emerging markets is AT&T (NYSE: T), which may be a surprise to some. The telecom’s recent acquisition of DirecTV will give the U.S. wireless provider a foothold in Latin America. DirecTV has 18 million subscribers in Central and South America, and is one of the biggest cable providers. Latin America has emerged as one of the largest buyers of Spanish-dubbed TV series and movies from the U.S., the U.K. and Australia.

AT&T says that in Latin America only 40% of households subscribe to paid-television services (versus 90% in the U.S.), and the Latin American middle class is its fastest-growing group of customers. In fact, DirecTV’s Latin America division represents 95% of subscriber growth.

DirecTV sells only TV services in the U.S., but in Latin America it also sells Internet and wireless broadband services. The company’s cellular networks have the capability to reach 43 million households across Argentina, Brazil, Colombia and Peru. Its goal is to reach 5 million of those households by the end of 2014.

Most telecom experts agree that AT&T’s expertise in developing such networks will give DirecTV a big advantage over its competitors as it offers new Internet services. AT&T is a Buy up to $38.

This tech revolution is bigger than just telecom. These companies are on the front lines of a revolution in business opportunities for global firms. The smartphones adopted by more and more people in emerging markets will create gateways to selling other products and services.

And Global Income Edge will be there to highlight these new investment opportunities for you.