Though most telecom stocks lost value over the last week, the sector witnessed a number of important events. Notable among the many developments is a recent Reuter report which stated that U.S. telecom behemoth, AT&T Inc. T is on the verge of attaining the U.S. regulatory approval for its proposed $48.5 billion takeover of DIRECTV DTV. In the meantime, AT&T has decided to invest $3 billion to expand high-speed mobile Internet network in Mexico.
In a separate development, Time Warner Cable Inc. TWC has been dealt a blow as it is the first company facing charges of violating the new set of net neutrality rules adopted by the Federal Communications Commission (FCC). On the other hand, Sprint Corp. S is leaving no stone unturned to intensify the wireless pricing war. The company recently introduced an unlimited text, talk and data plan for $80 in place of its current $70 scheme.
Over the last week, Canada and Mexico also witnessed consequential events. Canadian cable TV behemoth Shaw Communications Inc. SJR has decided to abandon its own IPTV platform development project and instead license Comcast Corp.’s CMCSA cloud-based X1 platform. In Mexico, America Movil S.A.B.’s AMX wireline division, Telmex, was recently dealt a major blow as Mexico’s telecom regulator Federal Telecommunications Institute (IFT) decided to allow access to the "last mile" of Telmex telephone networks to rivals.
Outside North America, France-based global telecommunications service provider, Orange SA ORAN recently received Jazztel Plc. shareholders’ approval to acquire the latter. Jazztel is a leading provider of broadband services along with fixed-line and mobile phone services to enterprises and consumer markets in Spain. Meanwhile, Nokia Corp’s NOK network unit, Nokia Networks cut a four-year deal with India’s leading telecom operator Bharti Airtel to deliver 3G wireless network equipment. (Read the last Telecom Stock Roundup for Jun 25, 2015.)
Recap of the Week’s Most Important Stories
1. As pera recent Reuters report, U.S. telecom behemoth AT&T may get the much anticipated FCC’s nod to close its planned purchase of DIRECTV, by next week.Notably, in May 2014, AT&T had inked a definitive agreement to buy DIRECTV for $48.5 billion in a cash and stock deal. DIRECTV is the largest satellite TV operator in the U.S. while AT&T has a strong fiber-based video network. The deal is expected to boost AT&T’s earnings through enhanced video offerings and reduced programming costs. (Read More: Will AT&T-DIRECTV Merger Cross the Final FCC Hurdle?)
2. Time Warner Cable, the second largest cable MSO (multi service operator) in the U.S., is facing a serious complaint for allegedly violating the new set of net neutrality rules adopted by the FCC. Recently, Commercial Network Services, a virtual server and streaming media provider, has filed an informal complaint with the FCC citing that Time Warner Cable has violated net neutrality law's "no paid prioritization" and "no throttling" sections. (Read More: Time Warner Cable Faces Net Neutrality Complaint.)
3. Sprint recently introduced an unlimited text, talk and data plan. Under the new scheme, Sprint will charge $60 for limitless text, talk and data and the remaining $20 will be lease payment for a 16 GB smartphone of the customer’s choice. For extra internal memory, customers will have to pay over $20 a month and $36 as a one-time activation fee. Sprint is focusing on reviving its customer base after a prolonged period of high customer churn. (Read More: Sprint Unveils "All-in" Text, Talk, Data Plan for $80.)
4. Orange recently received Jazztel Plc. shareholders' approval to acquire the latter. Last month, Orange had received the green signal from the Spanish Securities Commission (CNMV) for the deal. Notably, the European Union’s (EU) regulatory commission also provided a conditional approval for this deal. The total value of the deal is pegged at Euro 3.4 billion (approximately $3.8 billion). Orange is the second largest provider of fixed broadband services in Spain. (Read More: Orange Nears Jazztel Takeover as Shareholders Okay Move.)
5. Telmex, a division of American Movil, recently faced a major blow from Mexico’s telecom regulator, IFT. The move will compel Telmex to open up its infrastructure to other operators in the local loop (last mileage) segment. Also, interconnection fees levied by the company will be closely monitored. The IFT added that Telmex will have to decide on its terms for network offering within 60 days. (Read More: Peers to Access Telmex's Networks: America Movil in Trouble?)
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 |
-0.61% |
+2.80% |
|
T |
-0.59% |
+8.94% |
|
S |
-2.16% |
+8.92% |
|
TMUS |
-1.02% |
+43.39% |
|
VOD |
-2.51% |
+10.43% |
|
CHL |
-3.92% |
+10.12% |
|
AMX |
-2.96% |
-6.90% |
|
CMCSA |
+3.56% |
+8.66% |
|
DISH |
-0.89% |
-5.73% |
Over the last five trading sessions, share price movement of most major telecom stocks was negative with the sole exception of Comcast. This was in line with the broader market movement as S&P 500 also declined over the same time frame. Severe macro-economic crises in Greece coupled with fluctuations in the Chinese economy triggered volatile trading.
However, over the last six months, the price performance of key telecom stocks was mostly positive. T-Mobile US Inc. TMUS and Vodafone Group Plc. VOD rallied a considerable 43.39% and 10.43%, respectively, while American Movil lost the maximum of 6.90% over the same time period.
What’s Next in the Telecom Sector?
The market is eagerly waiting for the FCC’s decision regarding the proposed $48.5 billion merger deal between AT&T and DIRECTV. The FCC is likely to announce its verdict about this deal in the next week as per a recent Reuters report.
Barring this, 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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