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T-Mobile US to Launch OTT Service in 2018, Buy Layer3 TV

Zacks Equity Research

T-Mobile US Inc TMUS is entering the saturated U.S. pay-TV industry, with plans to launch its own streaming TV service in 2018. Meanwhile, the company’s recent deal to acquire Layer3 TV, Inc. will boost streaming service. The financial terms of the deal have been kept under wraps.

With this announcement, shares of T-Mobile US inched up 0.55% to $63.83 on Dec 13.

Based in Denver, CO, Layer3 TV is a cable company operating in Chicago, Washington DC and Los Angeles.  It combines TV, streaming online video content and social media content under one platform. Moreover, Layer3 TV runs its own, private IP network to directly serve users content and can manage content and bandwidth directly, without bandwidth throttling. Layer3 TV can also transmit HD video at a bandwidth of less than 4 megabits per second.

T-Mobile will leverage LTE network speeds and Layer3 TV’s technology to roll out streaming TV service. Notably, offering of streaming TV services has become a popular trend in the U.S. pay-TV industry.

Similar OTT Launces

Internet-TV streaming service is gaining market traction gradually in the United States. Recently, the legacy pay-TV industry has been facing stiff competition from online video streaming service providers such as Netflix, Hulu.com, YouTube etc. because of their cheap source of TV programming. The low-cost over-the-top (OTT) video streaming service has resulted in massive cord cutting, which is currently threatening the pay-TV business model. Video offering, which represents the core business function of cable-TV operators, is losing popularity.

As a result, Internet TV streaming has emerged as a strong alternative to counter this competitive threat.

Verizon Communications is expected to unveil the much-hyped online TV streaming service by the end of 2018, after the company inked a five-year digital streaming deal with the National Football League (NFL).

Major pay-TV operators such as AT&T Inc. T, DISH Network Corp. DISH and Sony Corp. SNE have already launched Internet-TV streaming services. AT&T’s DirecTV Now include channels like E!, FX, TBS and TNT. DISH Network’s Sling TV offers channels like ESPN, AMC, Cartoon Network, HBO and Univision. Sony’s PlayStation Vue provides a portfolio of channels like Bravo, Fox News, Nickelodeon and USA.

Zacks Rank & Price Performance

T-Mobile US carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

T-Mobile US portrays an impressive price performance. On a year-to-date basis, the stock has rallied 11.0% against the industry’s decline of 7.5%.



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