Telecom Stock Roundup: Verizon May Opt for Yahoo's Web Business, Comcast Considering Smartphone Sales
The past week has been quite eventful for the telecom industry. At the UBS Global Media and Communications Conference, Fran Shammo, Chief Financial Officer of U.S. telecom behemoth Verizon Communications Inc. VZ, hinted that the company may explore the possibility of acquiring the web-based businesses of Yahoo! Inc. YHOO, if the deal promises adequate value for its shareholders.
Yahoo is currently struggling with its web-based businesses. However, management is yet to take a final decision pertaining to the sale of its web businesses.
Additionally, Verizon has unveiled its much awaited WiFi calling feature from Dec 8, 2015. The function is currently available on the Samsung Galaxy S6 and S6 Edge. Support for other devices will soon follow via software updates. In a separate development, Frontier Communications Corp. FTR received the final approval from California Public Utilities Commission for its proposed acquisition of Verizon’s local wireline operations in California, Florida and Texas.
AT&T Inc. T, on the other hand, is moving full steam ahead with its objective of rolling out ultra-high-speed Internet service across the country. Recently, the company announced plans to expand its super-fast fiber optic broadband service – GigaPower – to 38 additional cities, bringing the total tally to 56 locations. Meanwhile, AT&Tand leading TV broadcaster TEGNA Inc. have finally reached a multi-year carriage agreement.
Furthermore, AT&T is considering producing or acquiring original content for its video services, including Internet TV, which is due for launch in Jan 2016. The company plans to particularly target customers who are not covered under traditional pay-TV services.
In the cable multi-service operator front, recently, at the Business Insider Ignition conference, Comcast Corp. CMCSA CEO Brian L. Roberts stated that the company is contemplating whether the decision to sell smartphones along with wireless services will be a feasible one. In Oct 2015, the company inked a deal with Verizon to become a mobile virtual network operator that would offer wireless services. Comcast is likely to initiate its wireless offerings from the second half of 2016.
In the meantime, T-Mobile US Inc. TMUS has come under the scanner of the New York Attorney General for false advertisements related to its ‘Un-carrier’ plan whereby it had promised to relieve its customers of grueling device subsidy contracts and related fees. The investigation is currently in progress.
Last week, several noteworthy developments have taken place outside the U.S. as well. In a recent turn of events, Mexican opposition senators voted in favor of extending the deadline of the conversion of TV signals from analog to digital by the end of 2016. The revised decision was taken on the grounds that an attempt to meet the Dec 31, 2015 deadline would leave millions of viewers across the nation without TV access.
Moreover, America Movil SAB AMX, the undisputed leader of the Mexican telecom market, has announced that its wireless tower business – Telesites -- which was recently spun off from the company will be listed on the Mexican stock exchange on Dec 21, 2015.
Meanwhile, the European Union Competition Commission (EC), the antitrust regulatory body of the European Union (EU) has rejected the UK competition authority’s plea to take over the evaluation of the Telefonica SA TEF - Hutchison Whampoa merger deal in the country, despite the latter’s claim of understanding the domestic market better.
Nokia Corp. NOK was in the news for its decision to sell its HERE high-definition (HD) mapping/navigation business to a consortium of German automakers comprising BMW, Daimler and Volkswagen (owner of Audi).
In Canada, Rogers Communications Inc. RCI announced its acquisition of Internetworking Atlantic Inc. – a communications technology company that offers a range of IT products to business institutions – for an undisclosed amount. The deal will help Rogers Communications to provide enhanced technology and enterprise service solutions to its business customers.
Read the last Telecom Stock Roundup for Dec 3, 2015.
Recap of the Week’s Most Important Stories
1. The core businesses of Yahoo perfectly complement Verizon’s focus areas. Notably, Yahoo boasts a significant user base that trails only Google of Alphabet Inc. and Facebook Inc. If the deal takes place, Yahoo’s online ad technology and popular content will be combined with AOL’s (a division of Verizon) targeted ad technology and consumer data platform and integrated into Verizon’s massive subscriber base and Internet-based mobile video offering to provide a powerful data-driven targeted mobile ad platform. (Read More: Is Verizon Mulling the Acquisition of Internet Giant Yahoo?)
2. Comcast’s wireless service is likely to be a hybrid product relying primarily on its WiFi hotspots, as it uses Verizon’s cellular network as a back-up to fill-in for areas that lack adequate WiFi coverage. At present, Comcast boasts an extensive public WiFi network consisting of nearly 11 million hotspots. At the conference, CEO Brian L. Roberts also stated the possibility of the MVNO agreement being extended in the near future with Sprint Corp. (Read More: Will Comcast Make it Big with its Entry into the Wireless Space?)
3. With the availability of AT&T’s GigaPower services, residential and small business customers will be able to enjoy Internet speeds of up to 1 Gbps. Customers will also be able to download as many as 25 songs in less than a second. Downloading a TV show will take less than three seconds, while an HD movie will consume less than 36 seconds. Moreover, AT&T’s GigaPower will provide customers with the latest Wi-Fi technology, best in-home Wi-Fi speeds, extended coverage as well as support for all devices. (Read More: AT&T Gigabit-Speed Internet Plans in Place: 38 Cities in Focus.)
4. Earlier this year, AT&T completed its acquisition of DIRECTV to become the largest pay-TV provider in the U.S. With U-verse, DIRECTV’s satellite TV and all-fiber GigaPower Internet service in its kitty, AT&T now has the operational flexibility to provide both traditional cable TV service as well as mobile video streaming service. This will allow the company to optimally cater to the needs of its customers by giving them an array of options to choose from, namely, traditional pay-TV, IPTV and mobile TV streaming service. (Read More: AT&T Mulls Content Creation for Video, Internet TV Service.)
5. The New York Attorney General’s office has received numerous complaints from various consumer protection groups who have alleged that T-Mobile US’ new equipment installation plan is deceptive and locks the customer in a two-year contract, which one can only terminate after the payment of a hefty fee. This clearly goes against the promise made by the company. We expect investor focus to remain on the proceedings of the investigation, going forward, to determine whether the charges brought against T-Mobile US are at all valid. (Read More: Are T-Mobile's Un-carrier Advertising Claims Faulty?)
Price Performance
The following table shows the price movement of major telecom players over the past week and the last six months.
Company | Last Week | Last 6 Months |
VZ | 0.98% | -1.80% |
T | 0.00% | 0.00% |
S | 5.35% | -17.44% |
TMUS | 0.99% | -7.01% |
VOD | -1.61% | -8.42% |
CHL | -1.83% | -9.71% |
AMX | -8.04% | -23.85% |
CMCSA | -3.13% | 2.13% |
DISH | -3.86% | -18.04% |
Over the last five trading sessions, the share price movement of most of the major telecom stocks was negative. America Movil (7.31%) and DISH Network (3.86%) shed the most during this period. However, Sprint traded in the green gaining a substantial 5.35%.
Over the last six months, the price performance of key telecom stocks has been predominantly negative as well. America Movil (23.85%) DISH Network (18.04%) and Sprint (17.44%) depreciated substantially over the six-month perod.
What’s Next in the Telecom Sector?
We do not foresee any significant changes in the telecom industry or overall global economic factors that can likely affect the industry in the coming week. However, on Dec 16, the FED is likely to take a decision on the interest rate hike which in turn may result in market volatility at least in the short term. Therefore, we expect telecom stocks to trade in line with the broader market movement.
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AT&T INC (T): Free Stock Analysis Report
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