Last week no major development in the telecom industry made it to the headline. However, a few developments like AT&T's (NYSE:T) strive to attain the much-awaited much awaited Federal Communications Commission’s (FCC) approval for the DIRECTV (NASDAQ:DTV) takeover are noteworthy. AT&T has reportedly agreed to offer two new low-cost Internet service plans for low income families within its wireline footprint, over a period of four years.
Mexican pay-TV and broadcasting behemoth Grupo Televisa SA (NYSE:TV) reported disappointing financial results in the second quarter of 2015. Both the top and the bottom line significantly lagged the respective Zacks Consensus Estimate.In the meantime, Orange SA (NYSE:ORAN), the largest telecom operator in France, divested an 80% stake in its video sharing portal – Dailymotion to Vivendi (PARIS:VIV) S.A.
In a separate development, Frontier Communications Corp (NASDAQ:FTR) has stated in a FCC filing its plans to integrate the proposed acquisition of wireline assets from Verizon Communications Inc (NYSE:VZ) into its own set up without disturbing the clients. On the other hand, Comcast Corp (NASDAQ:CMCSA) recently opened up its cable set top box and related software testing platforms to other cable TV operators. (Read the last Telecom Stock Roundup for Jul 2, 2015.)
Recap of the Week’s Most Important Stories
1. AT&T has been extending broadband related assurances to FCC on all fronts and has reportedly pledged to bring its 1 Gbps fiber-to-the-premises (FTTP) service, GigaPower, to 11.7 million customer locations provided its proposed acquisition of DIRECTV is approved.
Moreover, the company has promised to finish the added FTTP build, within four years of the merger's closure. In the same vein, AT&T has made promises concerning its low-end broadband services, in a separate filing with the FCC. The company plans to offer two new low-cost Internet service plans for low income families within its wireline footprint, over a period of four years. (Read More: AT&T Makes Broadband Commitments to Close DIRECTV Deal.)
2. Grupo Televisa reported second quarter of 2015 financial results. Net income in the reported quarter came in at approximately $114.2 million, down a substantial 33.8% year over year. Quarterly earnings per Global Depository Shares stood at 20 cents, significantly below the Zacks Consensus Estimate of 30 cents.
Quarterly consolidated net revenue of around $1,370.4 million reflects an improvement of 8.5% over the prior-year quarter but lagged the Zacks Consensus Estimate of $1,485 million. This was primarily due to weaker-than-expected advertising revenues. (Read More:Grupo Televisa Misses Q2 Earnings & Revenue Estimates.)
3. Orange divested an 80% stake of its video sharing portal – Dailymotion to French media behemoth Vivendi S.A. The total value of the deal was €217 million (around $237 million). Orange retains the ownership of the remaining 20% stake. Currently, on an average, Dailymotion generates approximately 139 million unique visitors per month compared with 1 billion visitors of YouTube.
In 2014, total revenue garnered by Dailymotion was €64 million. Since its inception in 2005, the company is yet to achieve profitability. Orange acquired Dailymotion in two phases (2011 and 2013) for a total consideration of €120 million. (Read More: Orange Divests Majority Stake in Dailymotion to Vivendi.)
4. Comcast has recently opened up its cable set-top box and software testing framework so that other cable TV operators can also access the source codes. The new platform is known as The Open Cable Automated Test Solution (OCATS), which according to the company will keep changing with the industry’s latest developments. Comcast is a major contributor to the set-top box industry with respect to standardization by furthering development of the Reference Design Kit (RDK). (Read More: Comcast to Share its Cable Set-Top Box Testing Platform.)
5. Frontier Communications has stated in a FCC filing that it has come up with a strategy to ensure rapid transition without any service interruptions to its customers, when it acquires Verizon’s wireline assets. To ensure smooth transition, Frontier has put down 140 individual functional guidelines, which primarily focuses on customer support data required to manage the business and the methods for pulling out data and transmitting the same from Verizon to Frontier.
Further, Verizon’s current employees will be trained on Frontier's business systems and practices to effectively cater to customers, post the integration of the former’s network assets. (Read More: Frontier Chalks Transition Plans for Verizon Wireline Asset Buy.)
Price Performance
The following table shows the price movement of major telecom players over the past week and the last six months.
Over the last five trading sessions, share price movement of most major telecom stocks was negative. This was in line with the broader market movement as S&P 500 also declined over the same time frame. The share price of Vodafone (LONDON:VOD) lost a substantial 13.34%.
Severe macro-economic crises in Greece coupled with fluctuations in the Chinese economy continue to trigger volatile trading. However, over the last six months, the price performance of key telecom stocks was mixed. T-Mobile US and Comcast rallied a considerable 32.56% and 10.36%, respectively.
What’s Next in the Telecom Sector?
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 soon. Moreover, on Jul 16, the FCC will vote on a complex structure for the upcoming "Broadcast Incentive Auction," scheduled to be held in the first half of 2016.
Additionally, Greece will take a decision by this weekend on whether the country will exit the European Union. All these developments will be closely monitored by the investors.