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Telecom Stock Roundup: AT&T, Qualcomm Post Robust Results, Mixed Q4 For Rogers Communications

Published 02/01/2018, 08:29 PM
Updated 07/09/2023, 06:31 AM

The telecom industry had a stellar run on the bourse last week as most of the key stocks traded in the green.

On the earnings front, U.S. telecom behemoth AT&T Inc. (NYSE:T) reported strong financial numbers in the fourth quarter of 2017 with both the top and the bottom line beating the Zacks Consensus Estimate. The company reported 4.1 million total wireless net adds, with 2.7 million in the U.S. (this was driven by connected devices, postpaid phones and prepaid) and 1.3 million in Mexico. In the reported quarter, AT&T lost 147,000 satellite TV customers and 60,000 U-verse TV customers. However, it gained 368,000 DIRECTV NOW connections.

In a separate development, AT&T is reportedly terminating ownership of multiple millimeter wave spectrum (mmWave) licenses gained from the acquisition of FiberTower. Per a settlement, AT&T’s FiberTower has agreed to return all of its 24 GHz spectrum licenses (total 121) and a portion of its 39GHz licenses to the FCC (Federal Communications Commission).

AT&T will have access to 479 of FiberTower’s 39 GHz spectrum licenses, estimated around 360 MHz of spectrum in total. Additionally, the company will have to pay $27 million to the U.S. Treasury to settle the FiberTower dispute.

Qualcomm Inc. (NASDAQ:QCOM) , the largest mobile chipset manufacturer worldwide, reported impressive financial results for first-quarter fiscal 2018 (ended Dec 24, 2017), with both the top and the bottom line beating the Zacks Consensus Estimate. During the quarter, the company shipped approximately 237 million CDMA-based MSM (Mobile Station Modem) chipsets, up 9% year over year.

Moreover, Qualcomm signed a memorandum of understanding with four leading Chinese handset developers for a multi-year sale of RF Front-End solutions. The value of the deal is more than $2 billion. However, the company also received a bad news. The EC (European Commission), the regulatory authority of the European Union, has slapped a fine of €997 million (approximately $1.24 billion) on Qualcomm over anticompetitive practices related to mobile chipset sale.

The EC claims that an iPhone/iPad modem exclusivity deal between Qualcomm and Apple Inc. (NASDAQ:AAPL) , which lasted from 2011 till the end of 2016, amounted to anti-competitive behavior. Qualcomm abused its dominant market position for 4G LTE chipset and payed significantly to Apple to secure modem exclusivity.

Only a week ago, in a major relief to Qualcomm, the EC gave its nod to the company for the acquisition of NXP Semiconductors NV (NASDAQ:NXPI) with some restrictive conditions. Meanwhile, the company is facing a hostile takeover bid from Broadcom Ltd. (NASDAQ:AVGO) of a massive $130 billion.

Canadian telecom giant Rogers Communications Inc. (NYSE:RCI) , reported mixed financial results for the fourth quarter of 2017, with the bottom line beating the Zacks Consensus Estimate and the top line missing the same. In fourth-quarter 2017, the company added 72,000 postpaid wireless subscribers.

Quarterly postpaid ARPA (average revenue per account) was around $99.59 compared with $94.36 in the year-ago quarter. The monthly churn rate was 1.48% compared with 1.35% in the prior-year quarter. Rogers Communications carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Read the last Telecom Stock Roundup for Jan 25, 2018.

Recap of the Week’s Most Important Stories

1. On a GAAP basis, AT&T reported net income of $19,037 million or $3.08 cents per share compared with $2,437 million or 39 cents from the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings came in at 78 cents, surpassing the Zacks Consensus Estimate of 65 cents. Quarterly total revenues declined 0.39% year over year to $41,676 million, primarily due to declines in video subscriptions. However, revenues beat the Zacks Consensus Estimate of $41,192.9 million. (Read more: AT&T Beats on Q4 Earnings & Revenues, Issues '18 Outlook)

2. On a GAAP basis, quarterly net loss of Qualcomm came in at $5,953 million or $4.03 per share against net income of $682 million or 46 cents in the year-ago quarter. Adjusted earnings per share (excluding special items) were 98 cents, higher than the Zacks Consensus Estimate of 90 cents. Quarterly total revenues of $6,068 million increased 1.2% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $5,947.7 million. (Read more: Qualcomm Beats Q1 Earnings and Revenue Estimates)

3. Rogers Communications’ quarterly net income was approximately $329.75 million. Adjusted earnings per share of 88 cents were above the Zacks Consensus Estimate of 68 cents. Total revenues were around $2,858.38 million, up 3% year over year but below the Zacks Consensus Estimate of $2,865 million. (Read more: Rogers Communications Q4 Earnings Beat, Revenues Miss)

4. The EC’s decision to fine Qualcomm $1.24 billion on charges that it offered discounts in exchange for chip purchase commitments will also raise questions on its business practices. The EC's ruling comes 13 months after South Korean regulators fined Qualcomm $853 million for alleged antitrust violations. The largest mobile chipset maker is also facing $1 billion lawsuit from Apple in the United States related to royalty and rebate payments. (Read more: Qualcomm Fined by EC, Signs MoU With 4 Handset Developers )

5. Millimeter wave spectrum is likely to play a major role in the deployment of 5G infrastructure. In the last few years, they have gained popularity due to the industry’s inclination toward 5G network technology. Notably, they can transmit more data at higher speeds with lower response times. Consequently, wireless carriers like AT&T, Verizon Communications Inc. (NYSE:VZ) and other market incumbents are planning to centralize their 5G-related operations in millimeter wave bands. The recent loss of millimeter wave spectrum licenses raises several questions on AT&T’s plans of offering standards-based mobile 5G services in various U.S. markets by late 2018. (Read more: Will Loss of Spectrum Licenses Affect AT&T's 5G Launch?)

Price Performance

The following table shows the price movement of the major telecom stocks both in the last week and the last six months.

CompanyLast WeekLast 6 Months
VZ4.60%11.07%
T5.24%0.41%
TMUS0.13%1.14%
S-6.58%-42.50%
TEF1.59%-10.27%
AMX5.61%8.41%
CMCSA-1.44%3.84%
CHTR1.40%-4.19%
DISH4.20%-27.99%

In the last five trading sessions, share price movement of most of the major telecom stocks witnessed a positive trend. America Movil, AT&T, Verizon and DISH Network (NASDAQ:DISH) gained significantly in the same time frame while Sprint lost substantially. However, price performances of most of the major telecom stocks witnessed a mixed trend in the last six months. Sprint, DISH Network and Telefonica (MC:TEF) suffered major reverses in the stock price, while Verizon gained attractively in the same time period.

What’s Next in the Telecom Space?

We expect heightened activities in the telecom industry over the next week as big names like BCE, TELUS and Infinera will release their fourth-quarter 2017 financial results. The market will closely evaluate these quarterly results in a bid to assess industry dynamics and future growth prospects.

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QUALCOMM Incorporated (QCOM): Free Stock Analysis Report

AT&T Inc. (T): Free Stock Analysis Report

Verizon Communications Inc. (VZ): Free Stock Analysis Report

Rogers Communication, Inc. (RCI): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Broadcom Limited (AVGO): Free Stock Analysis Report

NXP Semiconductors N.V. (NXPI): Free Stock Analysis Report

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