Telecom Stock Roundup: Comcast Unveils Wireless Plan, Qualcomm Countersues Apple

The U.S. telecom industry remained rather subdued last week. Nevertheless, a few developments were worth noting.

Comcast Corp. (NYSE:S) , the largest cable MSO (multi service operator) and media giant, declared plans for its much-hyped wireless venture. The company’s wireless service will be launched in mid-2017 under the “Xfinity Mobile” brand.Initially, Comcast will offer unlimited data and text plans solely the company’s high-speed broadband (Internet) and high-end X1 Internet and video package subscribers. The company will charge $45 for up to 5 lines for the bundled X1 package and $65 high-speed Internet. Customers can also choose to pay $12 per gigabyte every month.

In a separate development, Qualcomm Inc. (NASDAQ:QCOM) , the largest mobile chipset manufacturer using baseband technology globally, has counter attacked tech giant Apple Inc. (NASDAQ:AAPL) in relation to the last $1 billion lawsuit filed by the latter in the U.S. District Court for the Southern District of California in Jan 2017. Apple had accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates.

U.S. national wireless carrier Sprint Corp. (NYSE:S) recently announced a price cut for its unlimited data plans. As per the latest offering, Sprint is offering a single line with unlimited data, calls and text for $50 a month.The price will be $80 for two lines, $100 for three lines and $120 for four. This implies $30 per line for a family of four.

Meanwhile, competition is intensifying in the U.S. wireless prepaid market. The gap between prepaid and postpaid average revenue per user (ARPU) has narrowed significantly, forcing telecom biggies to turn their attention to the domestic prepaid mobile service business. AT&T Inc. (NYSE:T) , T-Mobile US Inc. (NYSE:T) , Sprint and United States Cellular Corp. (NYSE:S) are offering unlimited data to prepaid customers. All these stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, Internet TV is gradually gaining a strong foothold in the U.S. The legacy pay-TV industry in the country has been facing severe challenges from online video streaming service providers. The low-cost over-the-top video streaming service has resulted in massive cord cutting that is currently threatening the pay-TV business model. AT&T and DISH Network Corp. (NYSE:S) are already offering online streaming service while Verizon Communications Inc. (NYSE:VZ) and Comcast are planning to follow suit.

Read the last Telecom Stock Roundup for Apr 06, 2017.

Recap of the Week’s Most Important Stories

1. In Oct 2015, Comcast had inked a deal with Verizon to become an MVNO (mobile virtual network operator) and offer wireless services. Its wireless service will be a hybrid product relying primarily on WiFi hotspots, as it uses Verizon’s cellular network as a back-up to fill-in for areas lacking adequate WiFi coverage. At present, the company boasts an extensive public WiFi network consisting of nearly 16 million hotspots. (Read more: Comcast Unveils Wireless Plan: Competition to Intensify)

2. In its filing against Apple,Qualcomm clearly mentioned the value of its invented technologies, their contribution and share in the industry through its licensing program. The filing also provides details of Apple’s illegal and improper handling of agreements and negotiations with device manufacturers, misleading regulators to attack Qualcomm across the world. Reports also state that Apple had even warned Qualcomm against publicizing the better performance of iPhones with Qualcomm chips. (Read more: Qualcomm Counter Attacks Apple on its Allegations)

3. The latest price cut is one of Sprint’s continued efforts to lure customers from rival carriers by offering attractive promotional plans and lucrative discounts. However, such plans lead to a high cash burn rate and heavy losses for the company. Last month, Sprint promoted its unlimited data plans by offering its customers in Atlanta and Chicago DISH Network’s Sling TV service free of cost, on adding four or more lines on its Unlimited Freedom plan. (Read more: Sprint Unlimited Data to Cost Less: Will Investors Gain?)

4. Stiff pricing competition in the U.S. wireless telecom industry is a major concern. Recently, we saw four major wireless telecom companies participate in an unlimited postpaid data plan war. These wireless operators are now extending their unlimited data plan to the prepaid market as well. This was not the case even a few years back when the prepaid segment was largely ignored by wireless carriers interested in the lucrative postpaid wireless market. (Read more: Competition Intensifies in the U.S. Wireless Prepaid Market)

5. Internet TV has emerged as a strong alternative to counter the competitive threat from online video streaming services. At present, the web-based digital media market is growing by leaps and bounds. Digital media brands are gaining immense popularity especially among the younger generation. With the demand for smartphones and tablets rising, target customers are increasingly watching videos online, and preferring them over costlier legacy pay- TV connections. (Read more: Mobile Video Business: Gains Strong Momentum in the U.S.)

Price Performance

The following table shows the price movement of major telecom players over the past week and last six months.

In the last five trading sessions, share price movement of most of the major telecom stocks witnessed a mixed trend. Except America Movil (3.05%), none of these stocks reflected any significant uptrend or downtrend in the aforesaid time frame. However, in the last six months, the price performances of the major telecom stocks were positive barring Verizon. Among the stocks that gained substantially are T-Mobile US (38.93%), Charter Communications (NASDAQ:CHTR) (30.49%), Sprint (23.19%), America Movil (23.16%), Comcast (14.53%),Telefonica (MC:TEF) (14.49%), and DISH Network (12.30%).

What’s Next in the Telecom Space?

In the next week, Canadian telecom behemoth Rogers Communications and global mobile chipset behemoth Qualcomm will release their quarterly financial results. Except these,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.

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