Telecom Stock Roundup: Verizon Buys Yahoo's Core Assets, Sprint Launches New Unlimited Data Plan

Although most of the major telecom stocks lost value over the last week, the sector witnessed a number of important events. Notable among the many developments is U.S. telecom behemoth Verizon Communications Inc. (NYSE:VZ) completion of its long-awaited deal to acquire the core businesses of the Internet-company, Yahoo! Inc (NASDAQ:YHOO)., for $4.48 billion. The deal will create a major player in the mobile media and advertising space.

In Apr 2017, Verizon Communications unveiled plans to unite AOL Inc. with Yahoo’s core internet assets under one umbrella – Oath. The portfolio will include HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, BUILD Studios, Yahoo Finance, Yahoo Mail and more, with an aim to build consumer-friendly brands. However,Oath will reportedly sack nearly 2,100 employees, as Verizon will trim expenses and eliminate overlapping back office positions.

Further, Verizon is likely to start an online TV streaming service later this year. The company has decided to come up with dozens of channels nationwide for the new service. Management is currently negotiating with several TV network owners to secure online streaming rights. Recently, the company stated that the new service will include some innovative features to differentiate its offering from the existing products in the market.

Meanwhile, the fourth largest U.S. national wireless carrier, Sprint Corp. (NYSE:S) , launched a marketing promotion yesterday, offering a year of “unlimited” talk, text and data to users who will switch from Verizon, AT&T Inc. (NYSE:T) or T-Mobile US Inc. (NYSE:T) . In doing so, the company further intensified the mobile service pricing war going on among the four nationwide service providers in the U.S. wireless market.

Several important developments have also taken place in the telecom space outside the U.S. The telecom regulatory body of the European Union, the European Commission (EC), has launched a thorough investigation into the proposed acquisition of Netherlands-based NXP Semiconductors NV (NASDAQ:NXPI) by U.S. mobile chipset giant, Qualcomm Inc. (NASDAQ:QCOM) . The EC has a 90-working-days’ time limit, until Oct 17, 2017, to take a decision.

Canadian telecom operator Shaw Communications Inc. (NYSE:S) recently received a shot in the arm as credit rating agency Moody's Investors Service raised its rating outlook to positive from stable. The rating agency reaffirmed the company’s Baa3 senior unsecured ratings. Moody’s stated that the primary reason for the upgrade is the recent business restructurings of Shaw Communications. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

According to a recent report by the Competitive Intelligence Unit, Mexican telecom behemoth America Movil SAB’s (NYSE:AMX) wireless division, Telcel, is dominating mobile number porting in the region. Telcel has posted a positive mobile number portability of around 14.6 million lines since the systems introduction in Jul 2008.

Read the last Telecom Stock Roundup for Jun 8, 2017.

Recap of the Week’s Most Important Stories

1. The completion of the Yahoo deal exhibits Verizon’s strategic move to strengthen its digital media segments, globally. The combined set of assets across Verizon and Oath, from 5G to Internet of Things (IoT) and from content partnerships to originals, will create innovative products to lure customers worldwide. Oath’s global growth plan will be centered on key markets to extend its audience outside the U.S., including western Europe, Japan, Taiwan and Singapore. (Read more: Verizon Communications to Launch Oath Post Yahoo Buyout)

2. Sprint has been continually making efforts to lure customers from rival carriers by offering attractive promotional plans and lucrative discounts. This has led to a high cash burn rate and heavy losses for the company. Sprint has a debt-laden balance sheet and has been witnessing losses each year since 2007.Management has taken a two-pronged survival strategy. The first step is to, try to increase its postpaid subscriber numbers to gain market share. Second, try to find out a possible merger with another wireless operator or cable multi service operator (MSO). (Read more: Sprint Unveils Mobile-Service Freebies to Lure Customers)

3. In 2015, Verizon launched go90, a YouTube-like streaming-video service aimed at teenagers. However, the new online streaming video service will be separate from the previous two offerings as it will compete with established low-cost streaming video services. The over-the-top video streaming service has resulted in massive cord cutting that is currently threatening the pay-TV business model. Internet TV has emerged as a strong alternative to counter this competitive threat. (Read more: Verizon Gearing up to Launch Online TV Streaming Service)

4. In Oct 2016, Qualcomm entered into a definitive agreement with NXP Semiconductor to buy the latter. The EC will probe in-depth on whether the deal could lead to higher prices, exclusion of rival chipset suppliers and reduced innovation in the semiconductor industry. The merged entity is likely to command strong market positions with an extensive portfolio of baseband chipsets and chips for near-field communications. (Read more: Qualcomm-NXP Semiconductors Deal Facing In-Depth Probe by EC)

5. Recently, Shaw Communications sold its data center operations – ViaWest – to privately held Peak 10 for a consideration of C$2.3 billion. The company anticipates net proceeds of C$900 million from the deal. Shaw Communications has decided to spend net proceeds for ViaWest sale to acquire highly valuable wireless spectrums. It has agreed to acquire 700 MHz and 2,500 MHz wireless spectrum licenses for C$430 million from Quebecor. (Read more: Shaw Communications' Outlook Rating Upgraded by Moody'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 major telecom stocks was negative. Sprint (7.13%) and T-Mobile US (4.01%) lost significantly. However, in the last six months, the price performances of most of the major telecom stocks were positive. Among the stocks that gained substantially are America Movil (30.38%), Telefonica (MC:TEF) (23.21%), Comcast (NASDAQ:CMCSA) (18.56%), Charter Communications (NASDAQ:CHTR) (16.20%), DISH Network (NASDAQ:DISH) (10.98%) and T-Mobile US (10.52%).

What’s Next in the Telecom Space?

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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