Despite the sluggish economy and stiff competition, U.S. telecom
service providers are delivering consistent growth. These companies
are innovating products and services as well as enhancing the
existing ones to grow market share.
Telecom operators provide Voice Telephony, Data, Internet, Cable
and Satellite Television services through either wireless or
wireline networks. Future growth of the telecom industry depends on
the wireless segment as subscribers are discontinuing landlines and
moving quickly to wireless connections. We expect wireless services
to grow at a larger pace and account for 46% of the industry's
revenues in 2013, up from the current 42%.
The carriers are rapidly entering into the cloud computing
business due to increased competition and changing consumer habits.
Cloud computing is now a business prerequisite that is high in
demand. The global cloud computing market is currently estimated at
approximately $37 billion and is expected to hit $121 billion by
2015 at a growth rate of approximately 26%.
Verizon Communications
(
VZ
) was the first wireless provider to tap this growth opportunity
through the acquisitions of Terremark Worldwide and CloudSwitch in
2011.
Like Verizon,
AT&T Inc.
(
T
) is currently investing in network-based cloud, mobility and
network sourcing solutions. This is helping operators to
differentiate their products and services and pave the way for
strategic alliances between telecom and IT companies.
Further, the wireless operators are making significant
developments to alleviate competition from cable operators. As the
smartphone market is growing rapidly, companies are progressing
fast to acquire more spectrum licenses in order to support their
video content and other data services. In this regard, Verizon has
emerged as a strong winner following its agreements with several
cable operators like
Leap Wireless
(
LEAP
),
Comcast
(
CMCSA
),
Time Warner Cable
(
TWC
), Bright House Networks, and Cox Communications Inc. This
improvement allows Verizon and cable operators to sell each other's
residential and commercial products and services, thereby
solidifying their respective competitive positions in the telecom
sector.
Again, AT&T is following the same trend in the industry by
acquiring new spectrums from the U.S. chipmaker
Qualcomm Inc.
(
QCOM
). After AT&T lost its exclusive hold on
Apple Inc.
's (
AAPL
) iPhone earlier in the year, we believe the new spectrums would
aid it in improving the quality of services for the iconic
phone.
The company added another feather in its cap when it joined
hands with a social gaming company in order to add more value to
subscribers' wireless experience. AT&T collaborated with Zynga,
a popular Web-based social gaming company to offer mobile social
gaming options on its
Google Inc.
(
GOOG
) Android-based smartphones and tablets. Notably, AT&T was the
first wireless carrier to form an alliance with a social gaming
company.
The third-largest U.S. wireless carrier
Sprint Nextel Corp.
(
S
) is increasing its presence in Managed Telepresence services,
which are gaining popularity in corporate communication and is
expected to reach market capitalization of approximately $1.5
billion by 2016, with an annual growth rate of approximately 25%.
The company collaborated with Indian telecom giant Tata
Communications Limited to offer Managed Telepresence services. We
believe Managed Telepresence remains well positioned for
accelerated growth, creating revenue opportunities for network
service providers like Sprint.
We believe the product improvements and developments made by
companies will boost wireless profitability going forward. We are
maintaining our long-term Neutral rating on Verizon, AT&T and
Sprint with a Zacks # 3 (Hold) Rank for the short term (1-3
months).
APPLE INC (
AAPL
): Free Stock Analysis Report
COMCAST CORP A (
CMCSA
): Free Stock Analysis Report
GOOGLE INC-CL A (
GOOG
): Free Stock Analysis Report
LEAP WIRELESS (
LEAP
): Free Stock Analysis Report
QUALCOMM INC (
QCOM
): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
Report
VERIZON COMM (VZ): Free Stock Analysis Report
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