Last week witnessed considerable activities in the telecom sector. AT&T Inc. (T) announced intensions to launch its first software defined networking solution for enterprise customers. Telefonica SA (TEF) finally entered a formal agreement to acquire Vivendi’s broadband asset in Brazil. Meanwhile, China Mobile Ltd. (CHL) has been maintaining a strong momentum with massive 4G LTE subscriber addition.
On the other hand, telecom regulatory authorities of the European Union are likely to scrap the existing fixed-line phone call price cap regulation. The proposed deregulation of price capping may provide a significant impetus to several large telecom operators in that region. In addition, globally big telecom infrastructure solution developers are currently Mexico bound aiming to capitalize on the Mexican government’s nationwide mobile network deployment project.
Recap of the Week’s Most Important Stories
1. AT&T plans to launch its new service – Network on Demand, which is a first-of-its-kind software-defined networking solution, utilized as part of the company's User Defined Network Cloud (UDNC) strategy. According to the company, Network on Demand offers network services to streamline business processes by deploying online self-service portal. This would facilitate time savings, reduced complexity and improved cycle times for companies. (Read More: AT&T Plans Network on Demand, Targets Enterprise Market.)
2. Telefonica’s command in Brazil is expected to strengthen further on the back of a formal agreement to buy Vivendi’s broadband assets – GVT in the Latin American nation. The deal is valued at around €7.24 billion (approximately $9.3 billion). Vivendi expects to complete the deal by the first half of next year, but Telefonica has not divulged any details about the closure of the transaction, which still awaits the regulatory nod. For Telefonica, synergies from the acquisition appear quite promising. We believe the deal certainly puts the company in a win-win situation. (Read More: Telefonica Clinches GVT Buyout Deal to Fortify in Brazil.)
3. The European Union (EU) telecom regulators have decided to overhaul the telecommunications markets of the 28-country block. As part of this move, the regulators have proposed to discontinue with the fixed-line phone call price capping. Consequently, telecom operators will enjoy the liberty to decide on call charges for both end-users and alternative carriers who use that telecom operator’s network. The new regulation is expected to be implemented effective Oct 2014, subject to the approval of each member country’s parliament. (Read More: Will the EU Witness a Fixed-Line Call Price Cap Lift?)
4. China Mobile has been enjoying strong customer growth. The world’s largest telecom carrier by subscriber base reported substantial addition of 4G customers in August 2014.The Hong Kong-based company added 9.13 million 4G customers in August, exceeding 6.5 million additions in July and 5.8 million in June 2014. At the end of the month, China Mobile’s total 4G customer base totalled 29.57 million. However, a major part of the customer gain has been on account of migration of existing customers to its super-fast LTE network. (Read More: China Mobile Sees Success in 4G, Adds 9.1M Users in August.)
5. Several leading telecom infrastructure equipment developers, who have global operational experience are offering bid for the upcoming state-owned mobile network project in Mexico. The project is valued at an astounding $10 billion and the Mexican government has decided to complete the vendor selection process by mid-2015. The government has undertaken this massive project to instill competition in the highly monopolistic telecom industry. (Read More: Big Telecom Vendors Bid for Mexico Mobile Network Project.)
Price Performance
The following table shows the price movement of major telecom players over the past week and during the last 6 months.
|
Company |
Last Week |
Last 6 Months |
|
VZ |
+1.75% |
+8.85% |
|
T |
+1.09% |
+5.42% |
|
S |
-0.75% |
-27.11% |
|
TMUS |
-5.06% |
-11.65% |
|
VOD |
+2.23% |
-5.48% |
|
CHL |
+0.62% |
+48.74% |
|
AMX |
-3.95% |
+23.45% |
|
CMCSA |
-3.91% |
+10.03% |
|
DISH |
-4.11% |
+8.17% |
Over the trailing five trading sessions, the price movement for most of the major telecom stocks was negative. Vodafone Group Plc. (VOD) and Verizon Communications Inc. (VZ) emerged as top gainers over the last 5 trading sessions whereas T-Mobile US Inc. (TMUS) and DISH Network Corp. (DISH) lost the most over the same time frame.
On the other hand, most of the telecom stocks gained significantly over the last 6 months. China Mobile and America Movil witnessed considerable rally in stock prices of 48.74% and 23.45% respectively. However, Sprint collapsed a massive 27.11% over the same time frame.
What’s next in the Telecom Sector?
In the coming week, beleaguered mobile handset developer BlackBerry Ltd. will release its second quarter of fiscal 2015 financial results. The market will closely evaluate the results, looking out for any sort of turnaround for the company, which was once the king of smartphone. Investors are likely to get more information on the company’s newly launched Passport smartphone.
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