The U.S. telecom industry remained rather subdued last week. Nevertheless, a few developments were worth noting. U.S. telecom regulator Federal Communications Commission (FCC) recently revealed that its upcoming spectrum auction has received applications from as many as 104 companies. The 600 MHz low-band airwaves auction, popularly known as Incentive Auction, is scheduled to start from March 29, 2016.
Comcast Corp. CMCSA announced that it has started providing direct connection to Amazon.com Inc.’s AMZN Web Service (AWS) in a bid to serve its enterprise customers. The AWS partnership will provide Comcast’s business customers private network connectivity to the AWS Cloud services that perform critical business processes like production compute and storage, backup, collaboration and billing or website hosting. At present, Comcast provides up to 10 Gbps of dedicated Ethernet connectivity to AWS for its business customers.
Meanwhile, leading international wireless tower operator American Tower Corporation AMT has forayed into Tanzania through its latest tower deal with India’s largest telecommunications company – Bharti Airtel Ltd. Notably, Bharti Airtel’s Tanzania-based unit has agreed to sell nearly 1,350 of its communication towers in Tanzania to American Tower. Moreover, under the agreement, American Tower may acquire roughly 100 additional sites that are presently being developed, for an added consideration.
U.S. telecom behemoth Verizon Communications Inc. VZ recently launched its ‘Titan’ Ethernet program andintends to price its Ethernet cable offering aggressively to lure wholesale and retail customers and control churn. At present, Verizon’s fiber presence is limited to certain locations. The company looks to check the loss in orders by reducing the prices of its Ethernet services, going ahead. Also, Verizon is looking at other options like wholesale ‘Fiber to the Internet’ as part of extending the reach of its Internet access offerings to its customers.
Moreover, Verizon and CenturyLink Inc. CTL have clinched orders worth $150 million to provide network services and infrastructure support to state and local government agencies in Virginia. The contract, dubbed as ‘VITAnet’, will enable the said companies to provide services relating to the replacement of obsolete network and communications infrastructure in the Commonwealth. VITAnet intends to replace the Commonwealth of Virginia Network (COVANET) contract, which traditionally handled similar services.
In a separate development, DISH Network Corp. DISH announced that it has notified Comcast-owned NBC Universal and the FCC about its arbitration proceedings. The proceedings relate to a carriage dispute agreement between the two parties. The notice triggers a 10 day ‘cooling off’ period during which the two sides can continue negotiations while ensuring NBC Universal’s channels stay on air on DISH’s network for the time being.
Outside the U.S., China Unicom Hong Kong Ltd.CHU reported weak financial results in the fourth quarter of 2015. Loss per ADR (American Depository Receipt) was 30 cents. In contrast, the company had posted earnings per ADR of 10 cents in the prior-year quarter. Total revenue was down 9.2% year over year at $10,200 million in the fourth quarter of 2015.
Read the last Telecom Stock Roundup for Mar 17, 2016.
Recap of the Week’s Most Important Stories
1. The 600 MHz airwaves auction, was initially supposed to have taken place in 2014. However it was postponed owing to the complexity faced in designing the auction rules and related legal issues. Low-band spectrum is crucial for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities.These airwaves are being freed by TV broadcasters who no longer have any productive use of the same. The freed 600 MHz TV spectrums will instead be utilized by wireless operators to expand and strengthen their 4G LTE (Long-Term Evolution) networks. (Read More: Upcoming Incentive Auction Registers Massive Applications)
2. In 2015, Comcast had announced the creation of a new ‘Enterprise Service’ division with an aim to provide managed business services that include broadband, Ethernet, voice, router, security, business continuity and Wi-Fi for Fortune 1000 companies. Large companies require managing complex networks, developing business continuity plans and integrating cloud-based applications with business operations. In Sep 2015, Comcast had acquired Contingent Network Services to support its Enterprise Business division. (Read More: Comcast Allies with Amazon Web Service to Aid Enterprises)
3. American Tower has been aggressively expanding its portfolio through acquisitions in India, EMEA and Latin America, which together contribute nearly 50% of its organic core revenue growth. After deciding to exit the tower business in Africa, Bharti Airtel has been insistently selling its tower assets in various African countries to different companies. Last July, American Tower announced the acquisition of nearly 4,700 mobile phone towers from Bharti Airtel. In Nov 2014, Bharti Airtel’s Netherlands-based unit had signed a deal to sell its telecommunications towers in Nigeria to American Tower for about $1.05 billion. (Read More: American Tower to Buy Towers in Tanzania from Bharti Airtel)
4. In recent times, Verizon has witnessed declining Ethernet Cable orders, with its business customers choosing to switch to cable operators for the purpose. To tackle this challenge, Verizon is now looking to introduce its ‘Titan’ Ethernet program. At present,more and more customers have been switching to cable multi service operators for Ethernet services. The spotlight is now on the Ethernet market, with both telecom operators and cable MSOs vying for a reasonable share. (Read More: Can Verizon's Titan Ethernet Program Counter Competition?)
5. DISH Network and NBC Universal are currently at a stalemate over retransmission fees and several other related issues. Nevertheless, with both the companies recognizing the value each creates for the other, they are now keen to ink a new distribution agreement that will ensure that the end subscribers can continue watching their favorite content seamlessly. Settlements relating to carriage agreements are a pivotal step for both the companies going forward. (Read More: DISH, NBC Universal Extend Negotiations; Benefit Customers)
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 |
-0.56% |
23.36% |
|
T |
-0.59% |
23.09% |
|
S |
-11.76% |
-27.42% |
|
TMUS |
-0.30% |
-13.85% |
|
VOD |
-0.86% |
-3.73% |
|
CHL |
-4.51% |
-11.85% |
|
AMX |
2.35% |
-8.69% |
|
CMCSA |
-1.10% |
4.18% |
|
DISH |
-2.35% |
-21.30% |
Over the last five trading sessions, share price movement of most of the major telecom stocks was negative barring America Movil. Sprint slid a considerable 11.76% in the same time frame. Likewise, over the last six months, the price performance of key telecom stocks has been predominantly negative. Sprint (27.42%), DISH Network (21.30%), T-Mobile US (13.85%) and China Mobile (11.85%) have depreciated substantially over the six-month period. Meanwhile, Verizon (23.36%) and AT&T (23.09%) were the major gainers.
What’s Next in the Telecom Sector?
Focus is likely to remain on the FCC’s pending decision regarding cable MSO Charter Communications Inc.’s proposed $55.8 billion takeover bid of Time Warner Cable Inc. The deal was formulated in May 2015. Charter Communications has also decided to acquire Bright House LLC for $10.4 billion.
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