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Zacks Industry Outlook Highlights: AT&T, Verizon Communications, Comcast, Time Warner Cable and MetroPCS

Zacks Equity Research

For Immediate Release

Chicago, IL – February 1, 2013 – Today, Zacks Equity Research discusses the U.S. Telecommunications, including AT&T (T), Verizon Communications Inc. (VZ), Comcast Corp. (CMCSA), Time Warner Cable Inc. (TWC) and MetroPCS (PCS).


A synopsis of today’s Industry Outlook is presented below. The full article can be read at  

Link: http://www.zacks.com/commentary/25646/telecom-industry-stock-outlook-feb-2013

Despite the massive growth in fiber-to-the-home networks, we believe wireless networks will be the key player in the telecom industry growth story. In addition, the sector is witnessing a fundamental change. Earlier, it was voice calls that brought money to the operators. Currently, data and video have become the focus. New network standards aim at faster data connectivity, quick video streaming with high resolution, and rich multimedia applications.

Currently, the U.S. has approximately 300 million wireless subscribers. Mobile broadband has become the most lucrative source of revenue for the wireless operators. Massive growth of data buoyed by smartphone revolution is the main reason for this favorable scenario. Global revenue from mobile broadband is expected to reach $123-$125 billion in 2016.

Spectrum Crunch & Market Saturation

The U.S. wireless industry is facing acute spectrum shortages, sometime resulting in data packet dropping. Carriers are investing heavily for more effective utilization of their existing spectrum holding and are trying hard to add more spectrums to their portfolio. In addition to the four nationwide carriers, all the smaller pre-paid wireless operators are also opting for a sound LTE network to offer hassle free broadband video streaming and data transmission.

Meanwhile, smartphone penetration has crossed more or less half of the total U.S. post-paid wireless subscribers. Recently, pre-paid carriers have decided to offer high-end smartphones, such as iPhone 5.

Severe spectrum crunch coupled with gradual smartphone market saturation is forcing the wireless operators to look for other options to raise revenue. These include new pricing plan, a shift from unlimited data usage to tier-based data usage, and higher upgrade fees for smartphones in order to offset handset subsidies. In fact, the average revenue per user for most of the wireless carriers is rising over the last two years and is expected to grow in the long term primarily due to massive growth in mobile data usage.

As smartphone users are now increasingly downloading multimedia contents, video has become the primary network traffic. What is more interesting, in addition to download, the smartphone and tablet users are up-linking more and more video content and, in turn, becoming broadcasters in their own right. Several industry researchers predicted that video may account for 60% of total network traffic by the end of 2012.

Mergers and Acquisitions to Continue

Despite the failed merger agreement between AT&T (T) and T-Mobile USA, we believe the U.S. telecom industry will witness more M&A deals in 2013. AT&T needs spectrum to compete with its bigger rival, Verizon Communications Inc. (VZ).

Verizon bought spectrum from major cable MSOs including Comcast Corp. (CMCSA), Time Warner Cable Inc. (TWC) and Bright House Networks. Prepaid wireless operator MetroPCS (PCS) is currently undergoing FCC review for a merger deal with T-Mobile USA.

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