In the last week, all major telecom stocks traded in the positive despite the fact that the Federal Communications Commission (FCC) has again delayed decisions concerning the proposed mergers between Comcast Corp (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) and between AT&T Inc (NYSE:T) and DIRECTV (NASDAQ:DTV).
In Feb 2014, Comcast had reached an agreement to acquire Time Warner Cable for $45.2 billion. Similarly, in May 2014, AT&T had signed a definitive agreement to buy leading satellite TV operator DIRECTV for $48.5 billion.
Meanwhile, cable MSO (multi service operator), Cablevision Systems Corp (NYSE:CVC) has decided to offer HBO’s upcoming online service HBO Now to its broadband customers. Another cable MSO, Charter Communications Inc (NASDAQ:CHTR) is mulling over acquiring privately held cable TV operator Bright House Networks LLC. However, neither of the companies has confirmed the news.
Outside the U.S., French global telecommunications service provider, Orange (PARIS:ORAN) recently revealed the details of its 5-year strategic project called “Essential2020” designed to revamp its entire business model. In a separate development, Spanish telecom behemoth Telefonica (MADRID:TEF) received Brazilian authority’s final approval to takeover GVT. (Read the last Telecom Stock Roundup for Mar 12, 2015.)
Recap of the Week’s Most Important Stories
1. Recently, the FCC paused its shot clock once more on the pending reviews of Comcast‘s proposal to acquire Time Warner Cable and the merger between AT&T DIRECTV.The Comcast-Time Warner Cable deal has been delayed for the fourth time. Previously, the merger was deferred twice in the month of October and once in December.
Following that, the FCC had restarted its 180-day review clock in January. The FCC further stated that it has stopped the 180-day transaction clocks to evaluate the court verdicts which are pending regarding these two deals. (Read More: FCC Review for Important Telecom Mergers Delayed Yet Again.)
2. Quoting an unconfirmed source, Bloomberg recently reported that U.S. cable MSO Charter Communications is negotiating a buyout of privately held cable TV operator Bright House Networks LLC. However, neither company has confirmed the news. Bloomberg stated that the probable all-stock deal may value Bright House Networks around $12 billion, which currently serves about 2.5 million cable subscribers in Florida, California and Michigan. Bright House Networks is the sixth largest cable TV operator in the U.S. (Read More: Is Charter Communications Eyeing Bright House Networks?)
3. Cablevision Systems’ broadband customers will now be able to enjoy HBO’s upcoming streaming service – HBO Now. This HBO contract makes Cablevision the first company to strike such a deal with the former. However, Cablevision has not offered any pricing-related details. Nearly three million broadband customers will be able to access HBO Now.
The service has been strategically launched, matching the time of the season five premiere release of the channel’s blockbuster show – Game of Thrones. We believe that this deal will not only help Cablevision draw more broadband customers but will also drive its revenues. (Read More: Cablevision Brings HBO Streaming for Broadband Users.)
4. Recently, Telefonica received the final approval from Brazil’s regulatory authority, ANATEL, related to its takeover of Vivendi (PARIS:VIV)’s broadband assets – GVT. The regulatory body recently cleared the second part of the deal which involves share transfer. In Sep 2014, Telefonica (MADRID:TEF) had entered into an agreement with Vivendi to acquire GVT for a total consideration of €7.24 billion (approximately $9.3 billion).
Telefonica received the initial regulatory nod for this deal in Dec 2014. Meanwhile, the Brazilian regulator has imposed certain stringent conditions on Telefonica while approving the GVT takeover. (Read More: Telefonica Gets Nod to Acquire GVT.)
5. Orange recently revealed the details of its 5-year strategic project called “Essential2020”. Under this plan, the company will revamp its business model to suit the needs of the different segments of its clientele. The latest strategic move is designed to target price-sensitive low-end customers to high-end clients who value high-quality of services rather than price. Similarly, “Essential2020” will also target small and mid-sized enterprise customers to larger multinational corporates.
Over the 2015-2018 period, Orange decided to invest a whopping Euro 15 billion (around $15.88 billion) on its existing networks in a bid to increase fixed and mobile data transmission speed by at least three folds. (Read More: Orange Presents 5-Year Business Restructuring Plans.)
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 all major stocks was positive. America Movil SAB de CV (NYSE:AMX) gained the most. Similarly, over the last six months, the price performance of key telecom stocks was also predominantly positive. Meanwhile, companies like Sprint (NYSE:S) and America Movil lost a considerable 25.84% and 19.06%, respectively, over the same time frame.
What’s Next in the Telecom Sector?
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. Therefore, we expect stocks to trade in line with the broader market movement.