Last week, most of the major telecom stocks gained value despite the fact that several large telecom operators reported mixed financial results in the first quarter of 2015.
In the U.S., telecom behemoths Verizon Communications Inc. VZ and AT&T Inc. T reported impressive bottom-line results, however, both companies’ revenue figures failed to meet the respective Zacks Consensus Estimate. Nevertheless, both Verizon and AT&T witnessed strong retail postpaid wireless as well as wireline (broadband and video) subscriber addition.
Outside the U.S., Rogers Communications Inc. RCI, the largest Canadian telecom operator, beat the Zacks Consensus Estimate for revenues in the first quarter while its earnings failed to meet. The company also lost a considerable number of postpaid and prepaid wireless subscribers.
China Mobile Ltd. CHL, the largest global wireless operator with respect to subscriber count, also posted mixed first quarter results. Total revenue increased year-over-year but net profit declined for the seventh successive quarters. However, the company added approximately 53 million 4G LTE subscribers in the reported quarter. Strong 4G LTE subscriber growth at China Mobile may become a boon for Apple Inc. AAPL as the company is a major wireless partner of iPhones. (Read the last Telecom Stock Roundup for Apr 16, 2015.)
Recap of the Week’s Most Important Stories
1. Verizon Communications reported earnings per share of $1.02 beating the Zacks Consensus Estimate of $0.95. Quarterly net income came in at $4,338 million compared with a net income of $5,986 million in the year-ago quarter. However, quarterly net income decreased 27.5% year over year.
Quarterly total revenue increased 3.8% year over year to $31,984 million but missed the Zacks Consensus Estimate of $32,284 million. Operating income was $7,960 million compared with $7,160 million in the year-ago quarter. Quarterly adjusted EBITDA margin was 37.4% in comparison with 36.7% in the first quarter of 2014. (Read More: Verizon Beats on Q1 Earnings, Lags on Revenues.)
2. Rogers Communications’ quarterly net income stood at $208.6 million or 39 cents per share compared with $278.6 million or 62 cents in the year-ago quarter. Adjusted earnings per share stood at 41 cents, significantly below the Zacks Consensus Estimate of 49 cents. Quarterly total revenue stood at $2,597 million, up 5.1% year over year, outpacing the Zacks Consensus Estimate of $2,561 million.
First-quarter adjusted operating profit came in at $919.4 million, down 3% year over year. Quarterly adjusted operating margin was 35.4% compared with 38.4% in the year-ago quarter. (Read More: Rogers Communications Lags Q1 Earnings, Tops Revenues.)
3. China Mobile reported mixed financial results in the first quarter of 2015. Quarterly total revenue was approximately $25.9 billion, up 3.9% year over year. Net earnings were around $3.8 billion, down 5.6% year over year. Quarterly earnings before depreciation, amortization, interest and tax (EBITDA) were $9.5 billion, reflecting a rise of 2.8% year over year. EBITDA margin was 36.8% against 37.2% in the year-ago quarter.
As of Mar 31, 2015, China Mobile had a total of 815.38 million subscribers. Out of this, 437.54 million (53.7%) were 2G subscribers, 234.76 million (28.8%) were 3G subscribers and the remaining 143.08 million (17.5%) were 4G subscriber’s. (Read More: China Mobile Q1 Earnings Down, Revenues Up Y/Y.)
4. Sprint Corp.’s S prepaid service division – Boost Mobile – recently launched an unlimited voice call and text message service plan to enhance connectivity between U.S. inhabitants and their friends and family in Cuba. Starting as low as $50 a month, the plan – “Cuba Monthly Connect” – will allow Sprint’s customers in Miami to connect calls to Cuba without a long-term subscription contract.
With its latest service, Sprint is primarily targeting nearly 2 million Cuban-Americans who are mainly residing in Florida.The latest truce between U.S. and Cuba will allow U.S. telecom carriers to export telecom equipment and products to Cuba. (Read More: Sprint Cuba Bound — Will More Telecom Firms Follow Suit?)
5. America Movil S.A.B. de C.V. AMX, recently received shareholders’ approval for the spin-off of as many as 11,000 wireless towers owned by the company as a separate entity. Named as “Telesites,” the new company will be enlisted in the Mexican stock exchange.
Under the plan, existing shareholders would receive the same number and series of Telesites shares as they held in America Movil. Consequently, Telesites shares will be listed on the Mexican stock exchange without a public offering of the stock. Also, America Movil will transfer around $1.4 billion of debt to Telesites. (Read More: America Movil's Tower Spin-off Gets Shareholders' Nod.)
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 |
+0.36% |
+5.00% |
|
T |
-0.09% |
-2.03% |
|
S |
+0.79% |
-16.17% |
|
TMUS |
+6.50% |
+26.03% |
|
VOD |
+1.12% |
+12.13% |
|
CHL |
+7.64% |
+27.73% |
|
AMX |
+0.51% |
-7.26% |
|
CMCSA |
-1.92% |
+15.08% |
|
DISH |
0.00% |
+15.94% |
Over the last five trading sessions, share price movement of most of the major telecom stocks was positive. T-Mobile US Inc. TMUS gained the maximum value while Comcast Corp. CMCSA depreciated the most. Also, over the last six months, the price performance of key telecom stocks was predominantly positive. Although Sprint lost a considerable 16.17%, China Mobile and T-Mobile US rallied a respective 27.73% and 26.03%, over the same time frame.
What’s Next in the Telecom Sector?
We expect activities in the telecom sector continue to increase going forward as several telecom operators and cable MSOs are scheduled to release their first-quarter 2015 financial results. Notable among the companies are T-Mobile US, Orange, BCE Inc., America Movil SAB, Grupo Televisa S.A., Time Warner Cable Inc., Level 3 Communications Inc. and Chunghwa Telecom Co. Ltd.
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