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Telecom Stock Roundup: T-Mobile US to Rollout 600 MHz Spectrum, CenturyLink May Face $12 Billion Lawsuit

The U.S. telecom industry remained rather subdued over the last week. Nevertheless, a few developments were worth noting.

T-Mobile US Inc. TMUS , the third largest U.S. national wireless operator, has decided to roll out 600 MHz wireless spectrum across its operational region by this summer. In Apr 2017, the U.S. telecom regulator, Federal Communications Commission (FCC) declared the winning bidders for its latest 600 MHz low-band wireless spectrum auction, popularly known as -- Incentive Auction. The company was one of them.

Per a recent Bloomberg report, CenturyLink Inc. CTL might be charged with a fine-cum-damage recovery cost of $12 billion in response to a class-action lawsuit. This was filed by the entire group of customers affected by the company's alleged sales incentive scheme.

Notably, the new lawsuit can be linked to another case filed recently by CenturyLink's former employee, Heidi Heiser who alleged fraudulent practice by the company. The new lawsuit, filed in the Central District of California, includes Heidi Heiser's suit as well as similar accusations posted on social media and consumer review websites by those who accused CenturyLink of fraud, unfair competition and unjust enrichment.

U.S. telecom behemoth, AT&T Inc. T , and the First Responder Network Authority (FirstNet) together revealed customized buildout plans for states to consider for the first nationwide dedicated wireless network for first responders. States and territories will get 45 days to review the plans along with an opportunity to exchange feedback with FirstNet Authority. Following that a 90-day window will open for them to opt in or out of the project.

Notably, in Mar 2017, AT&T was selected by FirstNet to build and manage the first nationwide broadband network dedicated to America's police, firefighters and emergency medical services.

Leading cable multi-service operator and media giant, Comcast Corp. CMCSA recently brought its various advertising technologies together under a new division - Advanced Advertising Group. This division will include all ad-related technologies that it has acquired in last 12 years, along with its local cable ad sales business - Comcast Spotlight. The company has hired former Weather Channel executive, David Clark, to run the division. Comcast currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here

Meanwhile, President Donald Trump recently announced that his administration will do away with many policies related to the communist state of Cuba, taken by his predecessor, Barak Obama. As a result, the previous regime's decision to normalize U.S. diplomatic and economic relations with Cuba, which has been considerably strained since 1961, is under threat once again. This may hurt U.S. national wireless operator's dream to expand operations in Cuba. Within last two years, all four major telecom carriers like Verizon Communications Inc. VZ , AT&T, T-Mobile US and Sprint Corp. S have launched services in that country.

In a separate development, United States Cellular Corp. USM started offering a free iPhone 7 to those who switch to its network from rival carriers in a bid to attract new customers. This will further intensify the cut-throat pricing competition within the U.S. wireless industry.

Read the last Telecom Stock Roundup for Jun 15, 2017 .

Recap of the Week's Most Important Stories

1. The Incentive Auction raised around $19.8 billion from 50 bidders who won nearly 2,800 licenses in total. Low-band spectrum is essential for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities. T-Mobile US plans to extensively roll out 600 MHz spectrum later this year when new smartphones for this radio frequency are likely to be made available by Samsung and other manufacturers. (Read more: T-Mobile US Preparing to Deploy 600-MHz Low-Band Spectrum )

2. Discontent was expressed by existing customers of CenturyLink who complained about being charged more than what was quoted initially. The subscribers were often charged for services they never opted for. Some of the allegations mentioned that the company observed a monopolistic rule in certain areas of Alabama. The customers are of the opinion that this is an illicit move. The fine amount may vary from $600 million to $12 billion, based on its 5.9 million subscribers. (Read more: CenturyLink Faces Major Setback: Is $12B Fine Lurking? )

3. As part of the 25-year contract, FirstNet will provide AT&T with a swath of 20 MHz of spectrum in the 700 MHz frequency band for the entire duration. AT&T will also be given success-based payments of $6.5 billion in the next five years to design and build the network. The company is expected to spend around $40 billion over the life of the contract to build, deploy, operate and maintain the network. AT&T has projected that this contract will create more than 10,000 jobs in the next two years. (Read more: AT&T Unveils Individual State Plans for FirstNet Project )

4. Cable TV operators are gradually adopting the data-driven advertising technique which is already popular in the web-based advertisement arena. To derive the maximum synergy from the combined video content and video distribution platform, Comcast is extensively penetrating into the advertising technology market. Inclusion of dynamic ad-insertion, targeted audience advertising and data-driven TV advertisements is a step toward the same objective. (Read more: Comcast Consolidates Advertising Technology Wing )

5. We believe that the U.S. telecom operators may not reap any near-term benefits from Cuban investments as the country is less developed at present and reels under highly restrictive government regulations. However, in the long-term, Cuba may become a boon for those telecom carriers who choose to operate in the country. To sell products and services to 11 million untapped customers is a very lucrative and enticing opportunity. (Read more: Why the Cuban Dream May Be Over for U.S. Telecom Operators? )

Price Performance

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

Company Last Week Last 6 Months
VZ -2.47% -13.43%
T -1.60% -8.58%
S 2.10% -3.41%
TMUS 0.58% 9.45%
CHTR -0.54% 14.73%
TEF -3.01% 20.08%
AMX -0.63% 29.78%
CMCSA -1.83% 14.36%
DISH -1.68% 7.06%

In the last five trading sessions, share price movement of most of major telecom stocks was negative. Telefonica (3.01%) lost significantly. However, in the last six months, the price performances of most of the major telecom stocks were positive. Among the stocks that gained substantially are America Movil (29.78%), Telefonica (20.08%), Charter Communications (14.37%) and Comcast (14.36%). In contrast, Verizon lost 13.43% in the same time period.

What's Next in the Telecom Space?

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. Consequently, we expect stocks to trade in line with the broader market.

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AT&T Inc. (T): Free Stock Analysis Report

Sprint Corporation (S): Free Stock Analysis Report

Verizon Communications Inc. (VZ): Free Stock Analysis Report

Comcast Corporation (CMCSA): Free Stock Analysis Report

CenturyLink, Inc. (CTL): Free Stock Analysis Report

T-Mobile US, Inc. (TMUS): Free Stock Analysis Report

United States Cellular Corporation (USM): 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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