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Telecom Roundup: DISH, Verizon, Cable TV

Published 05/15/2015, 04:00 AM
Updated 07/09/2023, 06:31 AM

Last week has been pretty eventful for the telecom industry. U.S. telecom behemoth, Verizon Communications Inc (NYSE:VZ) has entered into a definitive agreement with AOL Inc (NYSE:AOL) to acquire the latter to diversify into the mobile video content development and online advertising market. On the other hand, consolidation process of the cable TV industry received further momentum as Cablevision Systems Corp (NYSE:CVC) has announced its intension to merge with Time Warner Cable Inc (NYSE:TWC).

Meanwhile, in a bid to mend its damaged reputation, the largest cable MSO (multi service operator) Comcast Corp (NASDAQ:CMCSA) has decided to enhance its customer service utilizing latest technologies. In a separate development, major telecom operators TELUS Corporation (NYSE:TU), BCE Inc. (NYSE:BCE) and Rogers Communication Inc (NYSE:RCI) have won considerable wireless spectrum licenses in the recently concluded airwaves auction held in Canada.

Coming to the first quarter of 2015 earnings results, DISH Network Corp (NASDAQ:DISH) and Windstream Corporation (NASDAQ:WIN) posted mixed results whereas Cincinnati Bell Inc (NYSE:CBB) and TELUS corp. reported strong results. (Read the last Telecom Stock Roundup for May 7, 2015.)

Recap of the Week’s Most Important Stories

1. Mergers and acquisitions have been a common phenomenon in the U.S. pay-TV industry despite the formation of strict regulations by the FCC to put a check on monopolistic practices. Recently, Cablevision Systems stated that the company may consider a merger deal with Time Warner Cable. Cablevision and Time Warner Cable are major cable MSO in the New York metropolitan area.

Verizon enjoys a strong footprint in this region owing to its fiber-based FiOS video and high-speed Internet services. The combined entity of Cablevision and Time Warner Cable will become a formidable challenger to Verizon. (Read More: Major Cable TV Deals Lined Up: Will FCC Say Yes?)

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2. Verizon has announced its decision to purchase AOL Inc., a major player in the digital content and online advertising space. As per the agreement, Verizon will shell out $50.0 in cash for every share of AOL common stock, highlighting a 17% premium over AOL’s Monday’s closing price. Notably, the value of the deal is estimated at around $4.4 billion. The deal is expected to be sealed this summer. Following the completion of this transaction, AOL along with tech sites TechCrunch and Engadget, and the Huffington Post will be subsidiaries to Verizon. (Read More: Verizon to Buy AOL for $4.4B Looks to Expand in Ad Market.)

3. Comcast has finally decided to redress customer grievances and make a turnaround in its organization to mend its damaged reputation with regards to customer service. After acquiring NBC Universal, Comcast has been recognized as a major player in the broader entertainment industry with a unique combination of content creation and distribution network.

However, the company’s lack of interest to enhance customer satisfaction has majorly marred the company’s reputation. Comcast’s decision to revamp its customer service management is a welcome step for the company’s future growth. (Read More: Comcast Using Technology to Improve Customer Care.)

4. DISH Network declared first-quarter 2015 financial numbers wherein earnings beat the Zacks Consensus Estimate while revenues were in line with the same. Quarterly net income came in at $351.5 million or 76 cents per share compared with net income of $175.9 million or 38 cents in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of 41 cents. Quarterly total revenue stood at $3,724.2 million, up 3.6% year over year, almost in line with the Zacks Consensus Estimate of $3,725 million. The company lost 134,000 video subscribers but gained 14,000 broadband subscribers. (Read More: DISH Network Beats Q1 Earnings, Revenues in Line.)

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5. Leading Canadian telecom service provider TELUS has stolen the show in Canada’s latest wireless spectrum auction. It paid for the lion’s share of the spectrum value, shelling out C$478.82 million for 122 licenses in the 2.5 GHz band. Notably, the second largest bidder was Videotron Ltd., which paid C$186.93 million for 18 licenses. In addition, Bell Mobility, a division of BCE Inc. acquired 51 licenses for C$28.99 million.Rogers Communications also took part in the auction and bought 41 licenses for C$24.09 million. (Read More: Canadian Telecom Firms make it Big in Wireless Spectrum.)

Price Performance

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

Telecom Performance

Over the last five trading sessions, share price movement of most of the major telecom stocks was mixed. Vodafone rallied the maximum of 4.77% while China Mobile Games & Entertainment (NASDAQ:CMGE) lost the highest at 3.96%. Likewise, over the last six months, the price performance of key telecom stocks was mixed. Although America Movil SAB de CV (NYSE:AMX) lost a considerable 12.83%, T-Mobile US Inc (NYSE:TMUS) and China Mobile rallied a respective 21.31% and 10.49%, over the same time frame.

What’s Next in the Telecom Sector?

In the coming week, two major European telecom operators, namely, Vodafone Group (NASDAQ:VOD) of the U.K. and Telefonica (MADRID:TEF) of Spain will report their quarterly results. In addition, a series of home sales data pertaining to the U.S. economy will also be declared.

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