The U.S. telecom industry remained rather subdued last week. Nevertheless, a few developments are worth taking note of.
AT&T Inc. T and Time Warner Inc. TWX have reportedly extended the deadline of their proposed $85.4 billion merger to Apr 22, 2018. The duration of the deal was extended in order to gain the remaining regulatory approvals required to close the merger. This is the third instance when AT&T has changed the closure date.
In a separate development, DISH Network Corp DISH inked a multi-year program licensing deal with CBS Corp. CBS, after resolving a three-day blackout. DISH Network’s customers were unable to view the Thanksgiving Day NFL match between Los Angeles Chargers and Dallas Cowboys, thanks to the blackout arising from a dispute over programming fees. The blackout affected 28 channels in 18 markets of 26 states, which are served by CBS-owned-and-operated stations.
Verizon Communications Inc. VZ came up with a range of wireline and wireless offers for Thanksgiving shoppers. Verizon offered its fiber-to-the-home (FTTH) customers with a five-day promotion, starting from Thanksgiving Day on Nov 23 till Nov 27. The company also came up with an offer of custom TV and phone online for $79.99 per month to new customers who subscribe for Fios Gigabit Connection. Verizon currently carries A Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, as per reports from SNS Research, the wireless or mobile network infrastructure industry is expected to grow at a rate of 2% over the next three years. As per projections, the market will witness an annual spending of $56 billion by 2020, up from $53 billion in 2017.
Ericsson in its recent report stated that the number of 5G subscriptions is set to reach 1 billion worldwide in 2023. By that time, 5G network will cover more than 20% of the global population. Per a report by Strategy Analytics, global 5G smartphone shipments are set to rise from 2 million units in 2019 to 1.5 billion in 2025, reflecting an average annual growth rate of 250%.
In the United States, all four national telecom operators including Verizon, AT&T, T-Mobile US Inc. TMUS and Sprint Corp. S are gearing up to start full phased 5G deployment from around 2020.
Read the last Telecom Stock Roundup for Nov 24, 2017.
Recap of the Week’s Most Important Stories
1. The U.S. DOJ (Department of Justice) in its lawsuit stated that the AT&T-Time Warner merger will hurt American consumers. The proposed deal will eventually lead to price hikes by rival pay-TV operators and subscribers. It will also impede the development of online video. AT&T has argued that the proposed deal is technically a vertical merger. None of the two companies share any overlapping businesses. Therefore, the deal is not going to reduce the number of competitors either from media or pay-TV or phone industry. (Read more: AT&T-Time Warner Extend Deadline to Resolve Regulatory Issues)
2. Conflict between TV broadcasters and pay-TV operators is not new in the United States. DISH Network claims that the short-term blackout has resulted in an extended deal. CBS is optimistic about its short-term and long-term economic and strategic targets pertaining to this deal. The financial terms of the deal have been kept under wraps. (Read more: DISH Network Inks Multi-Year Deal With CBS, Ends Blackout)
3. Recently, Verizon and AT&T inked a joint deal with Tillman Infrastructure to build cell towers in the United States. Privately-held Tillman is the owner and operator of towers, small cells and smart cities infrastructure. Per the deal, Tillman will construct customized towers and lease it to Verizon and AT&T. Construction of the towers will begin in the first quarter of 2018. (Read more: Verizon Gears Up for Black Friday Rush, Announces Offers)
4. The wireless network infrastructure industry continues to expand on the back of increased investments by mobile operators. Notably, the operators have increased investments in Heterogeneous Network or HetNet infrastructure. The spending will be allocated to small cells, carrier Wi-Fi and DAS (Distributed Antenna Systems) and 5G NR (New Radio) rollouts beginning in 2019, in order to cope with increasing capacity and coverage requirements. Further, mobile operators are keen to shift toward C-RAN (Centralized RAN) architecture. (Read more: Can Wireless Network Infrastructure Market Sustain Momentum?)
5. Superfast 5G mobile networks will be of utmost importance in managing the exponential growth of internet-connected devices, popularly known as Internet of Things (IoT). The U.S. telecom industry has lately emerged as an intensely contested space where success thrives largely on technical superiority, quality of services and scalability. Thus, in order to stay ahead of competitors, existing players need to be constantly on their toes to introduce innovative products. (Read more: Is 5G Wireless Service the Next Big Thing in Global Telecom?)
Price Performance
The following table shows the price movement of the major telecom stocks in both the last week and last six months.
| Company | Last Week | Last 6 Months |
| VZ | 9.86% | 10.11% |
| T | 5.71% | -4.30% |
| TMUS | 3.02% | -8.81% |
| S | -2.73% | -27.74% |
| TEF | 2.00% | -9.41% |
| AMX | 2.03% | 7.65% |
| CMCSA | 2.85% | -9.09% |
| CHTR | -2.89% | -1.71% |
| DISH | 1.22% | -20.02% |
In the last five trading sessions, share price movement of most of the major telecom stocks was positive. Verizon, AT&T and T-Mobile US gained significantly in the same time frame. On the other hand, price performances of most of the major telecom stocks were negative in the last six months. Sprint and DISH Network lost substantially in the same time period while Verizon gained the most.
What’s Next in the Telecom Space?
We do not foresee any significant changes in the telecom industry or overall global economic factors that can affect the industry in the coming week. Consequently, we expect stocks to trade in line with the broader market movement.
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