Last week has not been too eventful for the U.S. telecom sector. However, outside the U.S., several developments have made headlines. French telecom giant Orange SA ORAN received the final regulatory approval in Spain to takeover Jazztel although the clearance came with certain restrictive conditions.
Likewise, Spanish telecom behemoth Telefonica SA TEF has consolidated its footprint in Brazil with the acquisition of GVT. Moreover, Nokia Networks, the largest business wing of Nokia Corp. NOK took a strategic decision to acquire U.S.-based Eden Rock Communications. In a separate development, the Mexican government slashed its budget for the proposed nationwide wholesale wireless network project.
Back in the U.S., regional telecom service provider Frontier Communications Corp. FTR has decided to raise $2.5 billion in equity to fund its recent acquisition of some wireless assets of Verizon Communications Inc. VZ. (Read the last Telecom Stock Roundup for May 28, 2015.)
Recap of the Week’s Most Important Stories
1. Orange recently received green signal from the Spanish Securities Commission for its proposed takeover of Jazztel Plc., a leading provider of broadband services along with fixed-line and mobile phone services to enterprises and consumer markets in Spain. Notably, the European Union’s regulatory commission also provided a conditional approval for this deal earlier.
Jazztel boasts around 1.4 million broadband and fixed-line connections along with 1.16 million mobile users. Hence, the deal will help Orange consolidate its position in the highly saturated Spanish telecom sphere. (Read More: Orange Gets Regulatory Nod in Spain for Jazztel Takeover.)
2. Telefonica has closed the acquisition of Vivendi’s broadband assets – GVT. In Sep 2014, Telefonica had entered into an agreement with Vivendi to acquire GVT. The initial regulatory nod was received in Dec 2014. In Mar 2015, Telefonica received the final approval from Brazil’s regulatory authority, ANATEL, related to its takeover of GVT.
The regulatory body cleared the second part of the deal which involved the share transfer. Meanwhile, the Brazilian regulator has imposed certain stringent conditions on Telefonica while approving the GVT takeover. (Read More: Telefonica Closes GVT Acquisition Consolidates in Brazil.)
3. Nokia’s wholly-owned subsidiary, Nokia Networks (“NN”), has decided to acquire U.S.-based Eden Rock Communications. The acquisition of Eden Rock Communications, a multivendor self-organizing network will boost Nokia’s network performance during peak hours. Eden-NET technology has gained significant traction and is widely used in GSM, UMTS and LTE networks. Hence, integration of the newly-acquired technology into NN’s portfolio will enhance the network reliability and operational efficiency of the company to a large extent. (Read More: Nokia Arm to Acquire Eden Rock Communications.)
4. The government of Mexico recently slashed its planned expenditure from $10 billion to $7 billion for the proposed deployment of nationwide wholesale mobile network over the next 10 years. In 2014, the government had undertaken this massive project to instill competition in the highly monopolistic telecom industry. In Mar 2015, the ministry of communications of Mexico had opened tender to take part in this project. The Mexican government will allocate 90 MHz of spectrum in the 700 MHz band for the creation of a wholesale mobile network. (Read More: Mexico Trims Wholesale Wireless Network Project Budget.)
5. Frontier Communications plans to raise $2.5 billion in equity to facilitate the funding of its acquisition of Verizon’s wireline assets.The company announced that it will be making a public offering that will comprise $750 million of its common stock at $0.25 per share and $1.750 billion of mandatory convertible preferred stock at $0.01 per share.
Frontier Communications will buy Verizon’s local wireline operations in California, Florida and Texas for a consideration of around $10.5 billion.Taking into account Frontier’s equity offering move, Fitch Ratings maintained its BB rating on the company. (Read More: Frontier to Raise Capital to Fund Verizon Asset Acquisition.)
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 |
-1.00% |
+2.94% |
|
T |
+0.23% |
+5.99% |
|
S |
+0.64% |
+1.28% |
|
TMUS |
-0.83% |
+35.44% |
|
VOD |
-1.03% |
+7.78% |
|
CHL |
-0.95% |
+14.62% |
|
AMX |
+0.33% |
-7.94% |
|
CMCSA |
-0.03% |
+4.69% |
|
DISH |
+1.23% |
-4.85% |
Over the last five trading sessions, share price movement of most major telecom stocks was mixed. DISH Network Corp. DISH gained the maximum value of 1.23% while Vodafone Group Plc. VOD lost 1.03% over the same time frame. However, over the last six months, the price performance of key telecom stocks was mostly positive. Although America Movil SAB AMX fell a considerable 7.94%, T-Mobile US Inc. TMUS and China Mobile Ltd. CHL rallied a respective 35.44% and 14.62%, over the same time period.
What’s Next in the Telecom Sector?
We do not expect any significant change in the telecom industry or in the overall global economic factors that might affect the industry in the coming week. Therefore, we expect stocks to trade in line with the broader market movement at least in the near-term.
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