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Telecom Stock Roundup: T-Mobile US, Sprint Spur Mobile Price War; Incentive Auction Sees High Bidding

Zacks Equity Research

Though most of the major telecom stocks have lost value over the past week, the sector witnessed a number of important events. Notable among the many developments are U.S. national telecom carriers T-Mobile US Inc. TMUS and Sprint Corp.’s S decisions to “Unlimited Data Plans” which intensifies the wireless price war.

T-Mobile US offers its customers unlimited high-speed data starting at $70 per month for one connection with DVD-quality video streaming, charging an extra $25 for those who want high-definition video services. The price rises up to $120 for two lines and $140 for three lines. Any additional line after that is $20 extra a month. The company’s pervious unlimited plan was available at $95 per month. On the other hand, Sprint reduced the cost for its unlimited data plan to $60 from $75 a month while giving users access to DVD quality streaming video.

On the other hand, U.S. telecom behemoth AT&T Inc. T has declared discarding its policy of charging fees to customers exceeding their data caps. The carrier will instead lower the connection speed – something which has been done by its rivals for a while now.

In the last week, AT&T was in the news for two more developments. The company announced its collaboration with chipset manufacturer Intel Corp. INTC to develop new software-centric network technologies. This will aid AT&T in optimizing its Network for Functions Virtualization (NFV) capabilities for its AT&T Integrated Cloud (AIC) service. Moreover, AT&T entered into an agreement with Cuba’s state-run telecommunications company Empresa de Telecomunicaciones de Cuba (ETECSA) to offer direct roaming mobile interconnection services between the two countries.

Meanwhile, the second part of the 600 MHz low-band wireless spectrum auction, popularly known as Incentive Auction, witnessed bids of over $16.4 billion after 15th round of bidding. The U.S. telecom regulator Federal Communications Commission (FCC) opened the forward phase of the auction on Aug 16.

As per data provided by the Vertical System Group’s Mid-Year 2016 U.S. Carrier Ethernet Leaderboard, Charter Communications Inc. CHTR has surpassed Verizon Communications Inc. VZ as the third largest Ethernet carrier in the U.S. The ranking is based upon the retail port share of each provider. AT&T and Level 3 Communications Inc. LVLT still occupy the top two positions per the report.

Outside the U.S., Mexico’s telecom regulatory authority, the Federal Telecommunications Institute (IFT) recently deferred the planned auction of its 2.5 GHz band (2500MHz-2690MHz) wireless spectrum. It has been postponed from second half of 2016 to first quarter of 2017. Notably, wireless spectrums of 2.5 GHz band are very suitable for the deployment of 4G LTE networks.

In a separate development, Wireless Broadband Alliance (WBA), an industry association which promotes interoperability among WiFi operators, recently introduced the City WiFi Roaming Project in association with telecom operators from around the globe. The project has been started by rolling out integrated public WiFi roaming in New York, Barcelona, Dublin, Singapore, San Francisco and San Jose. Notably, 23 telecom operators have decided to offer free international public WiFi roaming facilities in several cities around the world.

Read the last Telecom Stock Roundup for Aug 18, 2016.

Recap of the Week’s Most Important Stories

1.    As per the latest initiative, T-Mobile US will do away with all its existing data plans and instead replace it with ‘T-Mobile One’ plan which is supposed to give its customers endless pool of LTE data without any restrictions. The plan will start from $70 and will offer unlimited text messaging along with voice calling as well as free roaming in selected countries. The plan is expected to be active from Sep 6.  (Read more: T-Mobile US Launches Unlimited Data Plan at $70.)

2.    The Incentive Auction, which was initiated by the FCC on Mar 29, 2016, completed its first part early last month. In the first part, which was essentially a reverse auction, the airwaves were freed by TV broadcasters who no longer had any productive use of the same. The TV broadcasters had agreed to free a substantial amount of 126 MHz of spectrums for a massive $86.4 billion. (Read more: U.S. 600 MHz Spectrum Auction Witnesses Stepped-up Bidding.)

3.    President Obama’s decision to normalize U.S. diplomatic and economic relations with Cuba, which have been considerably tensed since 1961, is starting to show results. Under his administration, new Cuban policy regulations, which have been approved by the Treasury and Commerce departments, aided the U.S. telecommunications industry to gain initial exemptions from the existing embargo to invest in Cuba.  (Read more: AT&T to Offer Direct Roaming Wireless Services in Cuba.)

4.    AT&T has been reshuffling its data packs in order to entice customers who have high data requirements. While raising data prices per gigabyte in the smaller packs viz 1GB/2GB data packs, the carrier is lowering the price of it’s large data packages like 30GB. This should be favorable for those who utilize data for watching online videos.  (Read more: AT&T to Stop Charging Customers for Exceeding Data Limit.)

5.    Charter Communications is believed to have gained considerable synergy from its recent horizontally integrated merger with previously Time Warner Cable and Bright House Networks. Additionally, the company can leverage Time Warner Cable’s Ethernet footprint to provide services to large business enterprises as well. Charter Communications saw an uptick in SMB related businesses in the second quarter of 2016. (Read more: Charter into Top 3 Ethernet Providers, Surpasses Verizon.)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-1.65%

2.78%

T

-2.86%

9.37%

S

1.50%

98.37%

TMUS

0.02%

20.46%

VOD

-0.48%

2.28%

CHL

-0.98%

15.12%

AMX

-3.99%

-12.09%

CMCSA

-3.11%

12.23%

DISH

-3.50%

6.62%

Over the last five trading sessions, share price movement of the major telecom stocks was negative. America Movil (3.99%), DISH Network (3.50%) and Comcast (3.11%) suffered considerably in the same time period. However, over the last six months, the price performance of most telecom stocks was positive barring America Movil which lost 12.09%. Among the stocks that gained considerably were Sprint (98.37%), T-Mobile US (20.46%), China Mobile (15.12%) and Comcast (12.23%).

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 likely affect the industry in the coming week. However, U.S. personal income data, PCE inflation data, consumer confidence data and the second estimate of the second quarter of 2016 U.S. GDP are set to be released in the coming week that we believe will be closely monitored by investors for a peek into the current U.S. macroeconomic picture.

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AT&T INC (T): Free Stock Analysis Report
 
SPRINT CORP (S): Free Stock Analysis Report
 
LEVEL 3 COMM (LVLT): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
INTEL CORP (INTC): Free Stock Analysis Report
 
CHARTER COMM-A (CHTR): Free Stock Analysis Report
 
T-MOBILE US INC (TMUS): Free Stock Analysis Report
 
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