Telecom Stock Roundup: FCC's Fee Hike & "Unlock the Box" Plan Raise the Ire of Pay-TV Operators
No significant developments were noted in the telecom industry last week despite a solid run on the bourse. However, few events made it to the headlines like the U.S. telecom regulator Federal Communications Commission's (FCC) decision to raise annual fees for satellite TV providers like AT&T Inc. T controlled DIRECTV and DISH Network Corp. DISH . These operators will now have to cough up 27 cents per subscriber - more than double the fees of 12 cents charged last year. However, the charges are lower than the rate of $1 per subscriber paid by cable TV and IPTV providers.
Major U.S. pay-TV operators are vehemently opposing the Notice of Proposed Rulemaking (NPRM) issued by Tom Wheeler, the FCC Chairman. In Feb 2016, the FCC voted 3-2 to advance the "Unlock the Box" NPRM. The proposal is likely to go for final voting on Sep 29, 2016. Pay-TV biggies like Comcast Corp. CMCSA , AT&T, Charter Communications Inc. CHTR and industry trade group National Cable & Telecommunications Association are taking a stand against the FCC proposal.
In a separate development, research report published by research and advisory firm, Ovum stated thatthe cellular mobile machine-to-machine (M2M) connections are expected to spread across the globe. By 2021, as many as 733 million of these M2M connections are estimated globally. This is almost 8.1% of all cellular connections forecasted in 2021. However, this expansion does not include the Narrow-band Internet of Things (NB-IoT) technology.
Meanwhile, Qualcomm Inc. QCOM , the largest manufacturer of wireless chipsets, has teamed up with AT&T to evaluate Unmanned Aircraft Systems (UAS) or drones on commercial 4G LTE networks. Notably, the trial will put the safety and security of drones on 4G LTE and 5G networks to test.
Sprint Corp. S , the U.S. national wireless carrier, and Nokia Corp. NOK , a leading telecom infrastructure developer, recently promoted their three-channel carrier aggregation in Kansas City's LTE Plus Network. The three-channel carrier aggregation was advertised using the latest network technology devices -- the Samsung Galaxy Note7, Galaxy S7, S7 edge, HTC 10 and LG G5, each having Internet download speeds of more than 230 Mbps (Mega Bits Per Second). Sprint currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Outside the U.S., Spanish telecom behemoth Telefonica SA TEF plans to file for an initial public offering (IPO) of its infrastructure division Telxius in the second half of 2016. The company may also consider a share market listing (an IPO) for its U.K. wireless unit O2 or even sell it by the end of this year.
Mexican telecom behemoth America Movil SAB AMX recently announced that its wireless division - Telcel (Radiomovil Dipsa) - has received a notification from the country's telecom regulator, the Federal Telecommunications Institute (IFT). The notification states that the IFT has decided to evaluate the stringent measures that were imposed on the company in Mar 2014. The authority also declared that it may review these asymmetric regulatory measures.
Read the last Telecom Stock Roundup for Sep 01, 2016 .
Recap of the Week's Most Important Stories
1. The American Cable Association (ACA) praises the fee increase for satellite TV operators by the FCC as it is deemed to bridge the yawning gap between cable operators and satellite TV operators. However, DISH Network expressed discontentment, citing that consumers will ultimately bear the brunt of the raised fees. The FCC has set its annual regulatory fees at $384 million for 2016, an increase of 11%-13% on an average from the year-ago figure. (Read more: FCC's Annual Fee Hike Irks Satellite TV Providers .)
2. According to the FCC, the set-top box market, dominated by pay-TV operators, is currently valued at about $20 billion annually. Meanwhile, lack of competition has resulted in higher rental fees for consumers. At present, an average consumer spends around $231 per annum to lease set-top boxes. According to a recent study by the FCC, the cost of cable set-top boxes has risen 185% while the price of computers, televisions and mobile phones has dropped 90% since 1994. (Read more: Will FCC's "Unlock the Box" Plan for Pay-TV Fall Apart? )
3. Machine-to-machine (M2M) is a way of communicating between networked devices using both wired and wireless networks, irrespective of human presence. The worldwide expansion of IP networks facilitates faster M2M communications with less power. Moreover, such networks leverage new business opportunities for consumers and suppliers. It also has multiple industrial uses with applications in varied sector like utilities, automotive, and healthcare. Several analysts believe that the mobile M2M services would generate revenues worth $67 billion in 2021. (Read more: Will LTE Lead the Machine-to-Machine Market After 2021? )
4. Sprint has expanded the three-channel carrier aggregation on more than 500 cell sites in Chicago. The promotion was followed by a live telecast of high-definition 4K video where attendants were also able to experience a low-latency with high-speed. Carrier aggregation is an LTE-Advanced feature which connects multiple bands of spectrum in order to generate broader channels, increase the bandwidth capability and hence function speedily on the respective devices. In general, it enables excess data transfer quickly via a much higher bandwidth. (Read more: Sprint's 3-Channel Carrier Aggregation Coming Soon .)
5. Qualcomm will promote its LTE-based drone experiments at the CTIA Super Mobility show in Las Vegas on Sep 8, 2016. The UAS test will be carried out on the Qualcomm Snapdragon Flight drone development platform and is scheduled to begin later in Sep 2016 at Qualcomm Technologies' San Diego Campus in an FAA (Federal Aviation Administration)-authorized UAS Flight Center. The test centre has real world conditions, ideal for testing drones. Also, it does not affect AT&T's regular network activities. (Read more: Qualcomm and AT&T to Assess Drones on 4G LTE Network .)
The following table shows the price movement of the major telecom players over the past week and the last six months.
Last 6 Months
Over the last five trading sessions, share price movement of the major telecom stocks witnessed a positive trend. Sprint (8.29%) gained significantly in the same time period. Likewise, over the last six months, the price performance of most telecom stocks was predominantly positive. Among the stocks that gained considerably were Sprint (66.58%), T-Mobile US (19.97%), Comcast (13.83%) and China Mobile (11.40%). In contrast, America Movil lost 20.28% in the same time frame.
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 affect the industry in the coming week. Therefore, we expect stocks to trade in line with the broader market movement.
Interested in IPOs? Check out the special edition of Zacks Friday Finish Line below, where Editor Maddy Johnson and Content Writer Ryan McQueeney interview Kathleen Smith of Renaissance Capital about the IPO market in 2016 (see part two here ).
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