Last week most of the major telecom stocks traded in the positive. The AWS-3 spectrum auction conducted by the Federal Communications Commission (FCC) came to an end, registering record-high winning bids worth $44.89 billion. AT&T Inc. (T), DISH Network Corp. (DISH) and Verizon Communications Inc. (VZ) are the major license winners while T-Mobile US Inc. (TMUS) also won a share.
In a separate development, the FCC has raised the download and upload speed of the Internet to be deemed as broadband (high-speed data). In a majority voting, the FCC stepped up the new threshold download speed to 25 Mbps from existing 4 Mbps while the upload threshold speed boosted to 3 Mbps from the current 1 Mbps. Meanwhile, Cablevision Systems Corp. (CVC) filed a lawsuit against Verizon concerning WiFi network advertisement.
Recap of the Week’s Most Important Stories
1. The Advanced Wireless Servies-3 spectrum auction conducted by the Federal Communications Commission (FCC) came to an end yesterday registering a record-breaking bidding of $44.89 billion, breezing past the regulator’s initial estimate of a little over $10 billion. In 2008, the FCC conducted a wireless spectrum auction which had accumulated a total of $19.6 billion.
The AWS-3 spectrum auction, which was initiated on Nov 13, 2014, has received as many as 70 applications. Altogether, 1,614 AWS-3 licenses have been put up for sale in the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands. (Read More: U.S. AWS-3 Spectrum Auction Ends with All-Time High Bids.)
2. The FCC increased the download and upload speed of the Internet to be deemed as broadband (high-speed data). The new broadband norms may pose major hurdle to the proposed Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) merger.
The recent changes will raise the combined Comcast-Time Warner Cable market share to over 50% even after the disinvestment of customers to Charter Communications. Comcast serves a high percentage of high-end broadband users which will in turn increase the overall market share of the combined entity. (Read More: New Broadband Norms May Hurt Comcast-Time Warner Cable Deal.)
3. Leading U.S. cable MSO Cablevision System has filed a lawsuit against U.S. wireless behemoth Verizon with the U.S. District Court in Central Islip, NY. Notably, Verizon had advertised on television, radio and the Internet claiming that its WiFi service is the fastest available. Subsequently, Cablevision sued Verizon, calling its advertising claims related to WiFi connections false and misleading.
The company also accused Verizon of designing its advertisements with an aim to deceive consumers and dent Cablevision’s competitive advantage. (Read More: Verizon's Legal Hurdle: Cablevision Sues Over False WiFi Ads.)
4. Recently, Reuters reported quoting three unconfirmed sources that the U.S. telecom behemoth AT&T is trying to sell some of its data centers worth about $2 billion in order to strengthen cash position to repay debts and meet future investment commitments. Sale of non-core assets is not new for AT&T.
In 2013, the company sold some of its wireless towers to Crown Castle Internationalfor $4.85 billion. In late 2013, the company sold its wireline operations in Connecticut to Frontier Communicationsfor $2 billion. In Jun 2014, AT&T sold its 10% stake in America Movilfor $5.57 billion to a real estate company controlled by Carlos Slim. (Read More: Is AT&T Considering Selling Non-Core Assets?)
5. Ace South Korean wireless communication service provider SK Telecom Co. Ltd. (SKM) reported mixed fourth-quarter 2014 results. Quarterly consolidated net income jumped a whopping 71.1% year over year to approximately $452.7 million. The upside in earnings was primarily supported by the equity gains from SK Hynix.
Consolidated operating revenues decreased a nominal 0.14% to approximately $3,860 million in the fourth quarter. However, full-year 2014, revenues raised 3.4% to $15.45 billion on the back of an expanding LTE subscriber base, signing of new businesses, the acquisition of SK Networks’ retail business by PS&Marketing, and earnings growth of subsidiary companies. (Read More: SK Telecom Q4 Earnings Grow Y/Y but Revenues Drop.)
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 |
+3.80% |
-2.59% |
|
T |
+5.29% |
-0.29% |
|
S |
+5.05% |
-37.86% |
|
TMUS |
+2.19% |
-8.73% |
|
VOD |
+0.60% |
+9.46% |
|
CHL |
+4.11% |
+26.17% |
|
AMX |
-2.84% |
-8.34% |
|
CMCSA |
+4.23% |
+6.51% |
|
DISH |
+7.00% |
+22.60% |
Over the last five trading sessions, the share price movement of most of the major telecom stocks was positive. However, notable exception to the trend was America Movil SAB (AMX) which lost value over this time frame. Meanwhile, over the last six months, the price performance of key telecom stocks was mixed. China Mobile witnessed a considerable rally in stock price of 26.17% while DISH gained 22.60%. On the other hand, Sprint Corp. (S) collapsed a massive 37.86%.
What’s Next in the Telecom Sector?
We expect activities in the telecom sector to gain momentum in the next week as several telecom and cable TV operators will release their earnings results. Large telecom operators like Sprint, Telus, Vodafone, CenturyLink and cable MSO Charter Communications will declare their earnings results.
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