Last week was pretty eventful for the telecom sector as many important events grabbed headlines. Notable among the many developments is T-Mobile US Inc.’s TMUS strategy to keep pressure on Federal Communications Commission (FCC) so that the regulator refrained from permitting telecom behemoths AT&T Inc. T and Verizon Communications Inc. VZ procuring more wireless spectrums. Additionally, T-Mobile US has finally shut down the legacy CDMA network of its prepaid wireless subsidiary – MetroPCS.
Meanwhile, Verizon has completed the AOL acquisition for $4.4 billion. With this the company has become a formidable player in the highly lucrative digital content and online advertising market. On the other hand, Sprint Corp. S is leaving no stone unturned to intensify the wireless pricing war. Sprint’s prepaid division, Boost Mobile, launched a 50% Bill Saving Data Plan. In a separate development, research firm IDC revealed that the enterprise videoconferencing and telepresence equipment market is flourishing worldwide.
Speaking of significant developments, Canada and Mexico is also not far behind. Canadian telecom operator Rogers Communications Inc. RCI has won the race to acquire currently bankrupt telecom carrier Mobilicity for approximately $355 million defeating its rival telecom carrier Telus Corp. TU.
In Mexico, the Ministry of Communications and Transport (SCT) is planning to launch an auction for 700 MHz nationwide shared broadband network on Oct. 29, 2015. In this regard, the SCT will publish the preliminary bidding conditions on Jul 17. The winners of the auction are likely to receive licenses in the first quarter of 2016.
Outside North America, Nokia Corp. NOK is currently evaluating several bids to divest its mapping/navigation division HERE. Moreover, European Union’s antitrust regulators are slated to take a call on Nokia Networks’ proposed acquisition of Alcatel-Lucent ALU by Jul 27.
In the meantime, European cable TV giant Liberty Global Plc. LBTYA declared that its upcoming network infrastructure upgrade project in the U.K. will soon start from Manchester. The total budget of this project is pegged at $4.75 billion. (Read the last Telecom Stock Roundup for Jun 18, 2015.)
Recap of the Week’s Most Important Stories
1. T-Mobile US is constantly building pressure on larger peers like AT&T and Verizon with respect to wireless spectrum procurement. Recently, the company has asked regulator, FCC, to disallow the purchase of low-band spectrum by AT&T from East Kentucky Network through a secondary market transaction. T-Mobile US argued that the purchase of low-band spectrum is not in tune with the FCC’s stated policy of public interest. (Read More: T-Mobile US Seeks to Thwart AT&T's Attempt to Buy Spectrum.)
2. Verizon has successfully completed its acquisition of AOL Inc., a major player in the digital content and online advertising space. The company has also retained all the online content businesses of AOL. Over the last few years, Verizon has been focusing on strengthening its Internet TV, mobile video, online advertising and online content delivery business, given that these businesses have the potential to generate significant revenues for the company. (Read More: Verizon Expands in Ad Market with $4.4B Acquisition of AOL.)
3. Quoting two anonymous sources, Reuters recently reported that three major German automakers, namely, BMW, Daimler and Audi have formed a consortium and teamed up with private equity firm General Atlantic to offer a binding bid for the HERE high-definition mapping/navigation business of Nokia. Nokia is currently conducting an auction for its HERE business division for which the company expects to get a value of Euro 2 billion – 4 billion. (Read More: Is Nokia Mulling the Sale of HERE to German Automakers?)
4. With a view to entice customers, Sprint has extended its existing Slash Your Payment in Half promotional policy to its prepaid wireless subsidiary – Boost Mobile. The company has stated that it will substantially reduce the phone bills of T-Mobile US’s MetroPCS and AT&T’s Cricket customers by 50% if they switch to its service. Further, Boost Mobile has claimed that the new promotional plan, which runs through Jul 20, 2015, can deliver $20–$30 in savings per month for a year for customers who wish to opt for it. (Read More: Sprint's Boost Mobile to Now Offer 50% Bill Saving Data Plan.)
5. According to research firm IDC, the worldwide enterprise videoconferencing and telepresence equipment market revenues totaled $484 million in the first quarter of 2015, up 2.2% year over year. The number of videoconferencing devices sold in the same time period increased 20.5% year over year. Revenues from both room-based and personalized videoconferencing systems improved 21% and 37.8% year over year, respectively. (Read More: Videoconferencing Equipment Gains Momentum.)
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 |
+0.04% |
+1.50% |
|
T |
+2.82% |
+8.39% |
|
S |
-1.49% |
+10.26% |
|
TMUS |
-1.86% |
+46.34% |
|
VOD |
+3.31% |
+11.68% |
|
CHL |
+2.77% |
+13.98% |
|
AMX |
+2.75% |
-3.18% |
|
CMCSA |
+1.24% |
+4.83% |
|
DISH |
-3.65% |
-4.53% |
Over the last five trading sessions, share price movement of most major telecom stocks was positive. Vodafone gained the maximum value of 3.31% while DISH Network Corp. DISH depreciated the most at 3.65% over the same time frame. Likewise, over the last six months, the price performance of key telecom stocks was mostly positive, with America Movil being the sole exception. T-Mobile US and China Mobile rallied a considerable 46.34% and 13.98%, respectively, while Comcast’s share price dropped 4.83% over the same time period.
What’s Next in the Telecom Sector?
In the coming week, a series of important U.S. macro-economic data are slated to release. These include information on personal income, home sales, consumer confidence, home prices, Construction Spending and ISM Manufacturing Index. Furthermore, 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 within this month.
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