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Telecom Stock Roundup: Sprint to Skip Incentive Auction, Comcast Enters Digital Video Market

Last week, most of the telecom stocks lost their value. The devaluation was in line with the broader market (S&P 500) movement owing to serious concerns over global economic growth, specifically the continued meltdown in China. However, this did not keep the telecom sector from witnessing consequential activities.

Leading national telecom carrier Sprint Corp.'s S decision to not take part in the 600 MHz low-band spectrum auction to be conducted by the U.S. telecom regulator Federal Communications Commission (FCC) in early 2016, grabbed much attention. We believe, one of the reasons behind Sprint's decision is its weak financial condition. The company has been witnessing losses annually since 2007.

Also, last week, leading cable MSO (multi service operator) and media company, Comcast Corp. CMCSA , came up with two important announcements. The companyhas launched a beta-trial run of its digital video platform - Watchable. Through this offering, Comcast plans to foray into the highly lucrative digital advertising market.

The full version of the service is likely to be made available by the end of fall this year. Moreover, Comcast revealed that its NBC Universal division is set to acquire a 51% stake in Osaka-based Universal Studios Japan, for $1.5 billion.

Meanwhile, U.S. telecom behemoth AT&T Inc. T recently declared that it expects to add more than 2 million net subscribers for its wireless operations in the third quarter-2015. Both postpaid and prepaid categories are likely to witness significant customers gain. AT&T also reaffirmed its forecast for full-year adjusted profit and revenue growth despite a $1.1 billion charge that the company might have to incur on account of DIRECTV's Venezuelan assets owing to exchange rate fluctuations in the country.

On the other hand, El Economista recently reported that Mexican telecom regulator - IFT -- is considering restricting AT&T from bidding for all of the 80 MHz of wireless spectrum across various Advanced Wireless Services (AWS) bands, scheduled to be auctioned in Jan 2016. Notably, the company has decided to invest $3 billion to expand high-speed mobile Internet network in Mexico.

Additionally, a recent report by The Wall Street Journal stated that U.S. telecom giant Verizon Communications Inc. VZ might soon strike an outright purchase or a leasing deal with DISH Network Corp. DISH for the latter's spectrum assets. Recently, at a Goldman Sachs investor conference, Verizon's CEO Lowell McAdam stated that the company has been in talks with DISH over some kind of arrangement pertaining to the latter's spectrum holdings.

Outside the U.S., the merger negotiations between U.K. telecom giant Vodafone Group Plc VOD and leading European cable MSO Liberty Global plc LBTYA came to an end after both the companies failed to reach an agreement on valuations. The discussions mainly focused on a series of transactions such as global asset swaps. However, the companies have not been able to determine the value of the resources to be exchanged which would help derive the maximum synergies. (Read the last Telecom Stock Roundup for Sep 24, 2015 .)

Recap of the Week's Most Important Stories

1. One of the reasons behind Sprint deciding to skip the Incentive Auction could be its weak financial condition. However, in doing so, the company will lack significantly in terms of network quality compared to other established players. The 600 MHz low-band broadcast TV spectrums will be utilized by wireless operators to expand and strengthen their 4G LTE networks. (Read More: Sprint to Skip the Upcoming Low-Band Spectrum Auction .)

2. Comcast's ad-supported Watchable platform offers content from 30 digital content developers. Initially, customers will be able to view Watchable on Comcast's Xfinity X1 set-top boxes and online at Watchable.com as well as on mobile devices such as smartphones and tablets through iOS compatible applications. Applications for Android compatibility will also be available soon. (Read More: Comcast Forays into Digital Video Market with Watchable .)

3. In 2014, the government of Mexico introduced reforms within its telecommunications sector which led to intensifying competition. Earlier this year, AT&T entered the Mexican telecom industry with the acquisition of Grupo Iusacell and Nextel de Mexico. With these acquisitions, AT&T currently possesses more spectrums in AWS bands than any other wireless operator in Mexico. (Read More: Will Mexico Restrict AT&T's Bid for AWS Spectrum Auction? )

4. Sprint is currently struggling for survival in the U.S. market. The stock price has plummeted a disappointing 21% over the last six months. Further, it is facing cut-throat pricing competition in the domestic telecom industry. This is invariably taking a toll on its financial health. Despite this, it would not be wise to write off Sprint immediately. Management has taken several steps for a turnaround, which can bring its business back on track if implemented properly. (Read More: Can Sprint Set Things Right for a Business Turnaround? )

5. Comcast has been focusing on its theme park business of late, pouring in billions of dollars in this field. The company foresees huge opportunities in international markets. Recently, Comcast announced plans of boosting its international operations through mergers and acquisitions. Over the last three to four years, theme parks have spelled success for Comcast. (Read More: Comcast Eyeing a 51% Stake in Universal Studios Japan .)

Price Performance

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

Company Last Week Last 6 Months
VZ -1.07% -8.99%
T 1.18% 1.81%
S -11.52% -18.82%
TMUS -7.48% 25.82%
VOD -3.85% 0.22%
CHL -2.48% -6.11%
AMX -1.72% -20.24%
CMCSA -0.85% 0.09%
DISH -3.98% -16.33%

Over the last five trading sessions, all of the major telecom stocks traded in the red barring AT&T. Sprint and T-Mobile US lost a substantial 11.52% and 7.48%, respectively, during the said period.

Likewise, over the last six months, the price performance of key telecom stocks has been mostly negative with a notable exception of T-Mobile US,which gained 25.82% over the same period. Meanwhile, America Movil, Sprint and DISH lost a significant 20.24%, 18.81% and 16.33%, respectively over 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.

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AT&T INC (T): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

COMCAST CORP A (CMCSA): Free Stock Analysis Report

VODAFONE GP PLC (VOD): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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