Weekly Telecom Notes: Verizon, AT&T And Sprint


The past week saw quite a few important developments in the wireless telecom sector. Verizon ( VZ ) said that its joint venture with Coinstar, which was announced late last year, is on its way to launching their Redbox Instant video streaming service before the end of the year. FCC Chairman, Julius Genachowski, meanwhile gave his approval for a plan proposed by AT&T ( T ) that could lift restrictions on the use of WCS for wireless broadband services such as LTE. T-Mobile meanwhile continued to make a comeback bid with several announcements in the past week, the most important of which was its decision to merge with MetroPCS and form a stronger entity that could pose a much more potent threat to Sprint ( S ).


Giving more details about their joint venture announced earlier this year, Verizon and Redbox owner Coinstar said that they are planning to launch an online video streaming service before the end of the year. Christened Redbox Instant, the online service aims to add on to the currently available DVD rental service that Redbox's kiosks provide with a subscription streaming service that will focus solely on newer movies in the initial stages. The joint offering poses a big threat to not only incumbents Netflix and Amazon but also cable operators such as Comcast and Time Warner Cable that are concerned about cord-cutters dropping their pay TV subscriptions in favor of cheaper web-based alternatives.

As for Verizon, it will be looking to monetize the growing demand for video on demand as well as drive the adoption of its high-speed LTE network. The advent of high-speed 4G LTE technology has made streaming good quality videos at high speeds possible and Verizon could look to bundle the service with its LTE wireless plans. Even otherwise, a standalone streaming service can help drive the demand for videos up and cause customers to consume more data on their mobile devices. Having recently debuted their shared data plans, Verizon will be looking to get more users to move into the higher tiers of their plans. (see Verizon's Christmas Launch Of Redbox Instant Will Drive Data Usage )


In a move that could address most of AT&T's spectrum concerns, the FCC Chairman, Julius Genachowski, gave his approval for a plan that could lift restrictions and make the WCS spectrum bands conducive for wireless broadband services such as LTE. The rest of the FCC board needs to sign off on the proposal before the so far useless bands can be put to any use. But the fact that the Chairman himself is pushing AT&T's request through the commission seems like a major coup for the wireless carrier that had only last year seen its T-Mobile acquisition attempt thwarted by the same regulatory body.

Having learned from the T-Mobile debacle however, AT&T has been targeting smaller deals or acquisitions to meet its spectrum needs. Over the past two months, AT&T has filed numerous applications with the FCC requesting permission to buy spectrum licenses in the 700MHz, AWS and WCS bands from a host of companies, including Comcast, CenturyTel and Nextwave Wireless. If the FCC approves AT&T's proposal to lift WCS restrictions, the carrier could have enough spectrum on its hands from its various acquisitions for its long-term LTE aspirations. (see AT&T LTE Prospects Bolstered By FCC Chairman's Support )


Sprint may have done well so far touting its unlimited plans to differentiate itself from the rest of the national carriers but that has changed with T-Mobile's launch of similar plans last month. With the announcement, T-Mobile signaled that it was back competing in the market after months of distraction caused by AT&T botched acquisition plans. A further sign of intent came late last week when the company announced a deal with Crown Castle to leaseback 7200 cell towers for $2.4 billion in cash in order to fund its network expansion plans. This came just weeks after T-Mobile hired a a new CEO who said that he will be looking to target Sprint in order to stop T-Mobile's postpaid subscriber losses.

But in what is probably its biggest move so far, T-Mobile announced on Wednesday that it will be merging the company with MetroPCS in a bid to increase its market share and draw synergies out of their combined LTE spectrum resources. This could be a big blow to Sprint which is also on a comeback trail, for it will now have to fend off the T-Mobile threat in addition to contending with the duopoly of Verizon and AT&T. However, the T-Mobile/MetroPCS merger could lead to consumer defections from MetroPCS whose CDMA network T-Mobile will be looking to shut down by 2015. Sprint could be benefited if it can add some of these customers now that it has the iPhone 5.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: DISH , S , T , VZ



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