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Telecom Stock Roundup: Verizon Offers FiOS as Prepaid Plan, Sprint Add Sling TV on Unlimited Data Plan

Zacks Equity Research

Most of the major telecom stocks lost value last week, in line with the broader market (the S&P 500). This was largely because ofthe possibilities of an interest rate hike next week by the Federal Reserve. However, this did not deter the telecom sector from engaging in a slew of activities.

As per a recent FierceTelecom report, U.S. telecom behemoth Verizon Communications Inc. VZ has decided to offer its Fiber Optic Service or FiOS as a prepaid plan - FiOS Prepaid. FiOS is basically a bundled service that offers access to Internet, telephone and TV over a fiber-optic communications network. FiOS Prepaid comes in the form of contract-free and credit-check-free or deposit-free means to avail the bundled service. The service is likely to be available wherever the regular FiOS plans are offered.

Moreover, Verizon is currently conducting field trials for its upcoming 5G wireless network in collaboration with several vendors. The company is considering mobile hotspot and home-based fixed wireless for initial deployment of the next-generation 5G wireless networks in the U.S. in 2018. However, a full phased 5G wireless network will be offered only in 2020.

U.S. national wireless carrier, Sprint Corp. S has reinforced its presence in the wireless industry with its decision to promote unlimited data plans. The company is offering its customers free Sling TV service, a liner streaming service of DISH Network Corp. DISH, if the customer adds four or more lines on its Unlimited Freedom plan. The offer is currently available to new and existing Sprint customers in Atlanta and Chicago.

Further, Bloomberg reported that Sprint has received $139.8 million as a damage recovery payment from Time Warner Cable for flouting regulations in relation to digital voice telephone services. In 2011, Sprint had filed a lawsuit against Time Warner Cable and other cable television companies for infringing the patents and using Sprint’s connections and services, without permission. Notably, Time Warner Cable is a division of Charter Communications Inc. CHTR.

Meanwhile, cable MSO Comcast Corp. CMCSA is progressing with the deployment of 5G wireless network.As per a recent Lightreading report, Comcast recently publicized the progress of its current network footprint which is expected to match up to the backhaul requirements of future 5G rollouts. Comcast currently carries a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On Mar 7, DISH Network received a shot in the arm as the S&P Dow Jones Indices issued a statement declaring that the satellite TV operator will be added on the S&P 500 GICS (Global Industry Classification Standard) Cable & Satellite Sub-Industry index prior to the opening of trade on Mar 13. DISH Network will be replacing semiconductor manufacturer Linear Technology which has been acquired by Analog Devices Inc. ADI in a $14.8 billion cash-and-stock deal.

In a separate development, on Mar 6, 2017, U.S. telecom giant AT&T Inc. T and Communications Workers of America (CWA) finally approved the labor agreement pertaining to CWA-represented former DirecTV employees in four states. This will help the service provider strengthen its relationship with its union workforce and encourage employees to continue under the existing labor contract.

Read the last Telecom Stock Roundup for Mar 02, 2017.

Recap of the Week’s Most Important Stories

1.    The FiOS prepaid subscription will start at $60 per month including a Wi-Fi router, which gives access to 25Mbps Internet service. Customers can also add TV and voice. The inclusion will cost $40–$50 a month for 155 TV channels, $40 for 200 channels (including 35 HD Spanish-language stations) and $10 a month for the basic phone service (read more:  Will Verizon's FiOS Gain Popularity as a Prepaid Plan?).

2.    Currently, Verizon is conducting customer trials in 11 U.S. cities for fixed 5G wireless network. The company is focusing on building a fiber and wireless infrastructure in a bid to deliver mobile video efficiently. The wireless giant, which was the first to deploy the 4G LTE (Long-Term Evolution) network nationwide, is initially testing equipment at 15GHz, 28GHz, 39GHz and 64GHz frequency bands for 5G network deployment (read more: Verizon to Commercially Deploy 5G Fixed Wireless in 2018).

3.    In Feb 2017, Sprint upgraded its unlimited data plan. Customers can buy a single line on Sprint’s unlimited plan for $50 a month, and from two to five lines for $90 a month. Any extra line will cost $40 each. These rates will remain effective till Mar 31, 2018. After that, the company will be charging normal rates, per which one line will cost $60 a month, two lines $100, and every line beyond that cost an additional $30 (read more: Sprint Makes Unlimited Data Plan Attractive with Sling TV).

4.    Comcast mentioned that its fiber networks cleared the initial evaluation and are ready to serve the backhaul needs of advanced 5G wireless networks. Additional fiber will be added for both residential and commercial services development, thus making extra capacity available for backhaul for the roll out of 5G technology. As far as the company’s existing coaxial plants are concerned, management stated that Comcast’s coax network will continue to serve residential broadband customers. However, nothing concrete was mentioned in relation to 5G (read more: Is Comcast's Network Ready for 5G Deployment?).

5.    DISH Network’s effort to diversify its business model from a pure-play satellite-TV operator to an Internet TV operator is encouraging. In fact, the company gained 28,000 pay-TV subscribers in the fourth quarter of 2016, owing to the popularity of its Internet TV service, Sling TV. Further, the flexible cash and liquidity position of the company opens up more avenues for investments (read more: DISH Network to be Added on S&P 500: Is the Stock a Buy?).

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

-1.68%

-5.13%

T

-0.97%

5.19%

S

-4.52%

26.47%

TMUS

-1.02%

37.57%

CHTR

-0.54%

22.14%

TEF

2.99%

-0.56%

AMX

4.85%

16.12%

CMCSA

-0.70%

13.99%

DISH

4.26%

28.78%

Over the last five trading sessions, share price movement of most of the major telecom stocks was negative. Despite this, America Movil (4.85%) and DISH Network (4.26%) gained substantially while Sprint (4.52%) lost significantly. However, over the last six months, the price performance of most of the major telecom stocks was predominantly positive. Among the stocks that gained significantly are T-Mobile US (37.57%), DISH Network (28.78%), Sprint (26.47%), Charter Communications (22.14%), America Movil (16.12%) and Comcast (13.99%).

What’s Next in the Telecom Space?

We do not foresee any significant changes in the telecom industry or overall global economic factors that can affect the industry in the coming week. Consequently, we expect stocks to trade in line with the broader market.

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AT&T Inc. (T): Free Stock Analysis Report
 
Sprint Corporation (S): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
DISH Network Corporation (DISH): Free Stock Analysis Report
 
Comcast Corporation (CMCSA): Free Stock Analysis Report
 
Analog Devices, Inc. (ADI): Free Stock Analysis Report
 
Charter Communications, Inc. (CHTR): Free Stock Analysis Report
 
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