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Telecom Stock Roundup: Solid Q4 for T-Mobile US, Verizon Brings Unlimited Data Plan Back

Zacks

The telecom sector did not witness any notable event last week. With respect to fourth-quarter results, national wireless carrier T-Mobile US Inc. TMUS and optical transport network developer Infinera Corp. INFN posted strong financial numbers. On the other hand, leading Canadian telecom operator TELUS Corp. TU and U.S. regional telecom service provider Cincinnati Bell Inc. CBB reported disappoint numbers.

Both T-Mobile US and Infinera surpassed the Zacks Consensus Estimate with respect to the top and the bottom line. As of Dec 31, 2016, the total customer base of T-Mobile US was 71.455 million, up 12.9% year over year. Branded postpaid phone customers totaled 31.297 million, up 6.6%. Branded postpaid mobile broadband customer count was 3.13 million, up 33.8%. Branded prepaid customer count was 19.813 million, up 12.4%. Wholesale customers tallied 17.215 million, up 23.4%.

In the reported quarter, T-Mobile US added a net 0.933 branded postpaid phone customers, 0.264 branded postpaid mobile broadband customers, 0.541 branded prepaid customers and 0.363 wholesale customers.Total net customer addition was 2.101 million, signifying the 15th successive quarter of over one million net customer additions.

In contrast, Cincinnati Bell and TELUS reported weak results wherein both the top and the bottom line fell short of the Zacks Consensus Estimate. At the end of 2016, Cincinnati Bell had 0.2013 million residential voice lines, down 7.6% year over year and 0.3224 million business voice lines, up 5.7% year over year. Long distance lines were 0.3173 million, down 6.6%. DSL Internet subscribers were 0.1056 million, down 21%. Fioptics Internet customers were 0.1976 million, up 28.6%. Fioptics video subscribers were 0.1376 million, up 20.3% year over year.


As of Dec 31, 2016, TELUS had 8.585 million wireless subscribers, up 1.5% year over year. Postpaid users were 7.55 million, up 2.7% while the prepaid user count was 1.035 million, down 6.3%.Net wireless subscriber gain in the reported quarter was 78,000. Postpaid customer net addition was 87,000, up 40.3% year over year. Prepaid customer net loss was 9,000.

Meanwhile, U.S. telecom behemoth Verizon Communications Inc. VZ has decided to bring back unlimited data plan after five years. Starting from Feb 20th, Verizon’s plan will charge $80 a month for one phone and $180 a month for four phones. Notably, three other U.S. wireless carriers Sprint Corp. S, AT&T Inc. T and T-Mobile US have opted for unlimited offerings as a weapon to lure customers from their rivals.

A major portion of Verizon's business comes from its retail wireless and wireline businesses. The company has reintroduced the unlimited data plan to gain subscribers, keeping pace with competition.Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Read the last Telecom Stock Roundup for Feb 10, 2017.

Recap of the Week’s Most Important Stories

1. GAAP net income of T-Mobile US in the fourth quarter was $390 million or 45 cents per share compared with net income of $297 million or 34 cents in the year-ago quarter. Quarterly earnings per share of 45 cents were well above the Zacks Consensus Estimate of 29 cents.Total revenue jumped 23.4% year over year to $10,175 million in the reported quarter, surpassing the Zacks Consensus Estimate of $9,838 million (read more: T-Mobile US Tops Q4 Earnings, Revenue Estimates).

2. Infinera reported fourth-quarter 2016 adjusted loss per share of 18 cents, which was narrower than the Zacks Consensus Estimate of a loss of 19 cents. Quarterly GAAP net loss was $36.3 million or a loss of 25 cents per share as against the year-ago net income of $12.6 million or 8 cents per share.Quarterly total revenue came in at a little over $181 million, down 30.4% year over year, but outpaced the Zacks Consensus Estimate of $176 million (read more: Infinera Q4 Loss Lower than Expected, Revenues Top).

3. On a GAAP basis, quarterly net loss at Cincinnati Bell was $3.9 million or a loss of 9 cents per share as against a net income of $30 million or 71 cents per share in the year-ago quarter. However, quarterly adjusted (excluding special items) earnings per share of a penny underperformed the Zacks Consensus Estimate of 3 cents. Quarterly total revenue was $285.3 million, down 4% year over year and also below the Zacks Consensus Estimate of $305.3 million (read more: Cincinnati Bell Misses Q4 Earnings, Revenue Estimates).

4. GAAP net income at TELUS was approximately $60.8 million, down a significant 69% year over year. GAAP earnings per share were 11 cents, exhibiting a decline of 68.2% year over year. Fourth-quarter adjusted earnings per share were 40 cents, way below the Zacks Consensus Estimate of 46 cents. Total revenue came in at approximately $2,475.4 million, up 2.7% year over year but below the Zacks Consensus Estimate of $2,518 million (read more: TELUS' Earnings and Revenues Miss Estimates in Q4).

5. Unlimited data plans or unlimited offerings are quite common in the wireless industry. Unlimited data offerings usually come with attractive promotional plans, advertisements and lucrative discounts. Toward this end, Verizon’s unlimited 4G LTE data plan, called Verizon Unlimited, comes after a span of almost five years. The last time that the company had offered unlimited data plans for most customers was in 2011.We appreciate such a move on Verizon’s part and believe that it will boost the company’s long-term prospects (read more: Verizon's Unlimited Data Plans Heat Up Wireless Industry).

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-0.93%

-8.87%

T

-0.15%

-2.00%

S

4.11%

50.74%

TMUS

-0.89%

32.57%

VOD

-0.96%

-20.99%

CHL

-1.22%

-9.76%

AMX

5.60%

6.79%

CMCSA

2.56%

13.80%

DISH

3.81%

20.57%

Over the last five trading sessions, share price movement of most of the major telecom stocks witnessed a mixed trend. America Movil (5.60%), Sprint (4.11%) and DISH Network (3.81%) gained substantially over the same time frame. Likewise, over the last six months, the price performance of most telecom stocks was mixed. Among the stocks that gained significantly are Sprint (50.74%), T-Mobile US (32.57%), DISH Network (20.57%) and Comcast (13.80%). On the other hand, Vodafone lost 20.99%, over the same time frame.

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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