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Telecom Stock Roundup: Shaw Communications, Rogers Communications Post Mixed Numbers

Zacks

Last week has been pretty eventful for the telecom industry. On the earnings front, Canadian telecom behemoths Rogers Communications Inc. RCI and Shaw Communications Inc. SJR reported mixed results. Rogers Communications’ bottom line surpassed the Zacks Consensus Estimate while top line missed the same. Similarly, Shaw Communications’ bottom line matched the Zacks Consensus Estimate while top line missed the same.

U.S. telecom giant Verizon Communications Inc. VZ entered into a three-year minimum purchase agreement with Corning Inc. GLW to buy fiber optic cables and associated hardware for nationwide wireless broadband network. Per the deal, Verizon will acquire up to 20 million kilometers (12.4 million miles) of optical fiber each year from 2018 through 2020 from Corning, with a minimum purchase commitment of $1.05 billion.

As per a recent report by Reuters, Verizon is considering a counterbid to acquire Straight Path Communications Inc., a leading provider of fixed wireless spectrum licenses. Notably, AT&T Inc. T announced its decision to purchase Straight Path Communications in an all stock merger deal on Apr 10. Total value of the AT&T deal was around $1.6 billion after considering the liabilities of Straight Path. Both Verizon and AT&T currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, Windstream Holdings Inc. WIN entered into a $228 million deal to acquire Broadview Networks, a leading provider of cloud-based unified communications solutions to small and mid-sized businesses (SMBs). Windstream expects the acquisition to close in the third quarter of 2017 subject to necessary regulatory clearances. Moody's Investors Service described Windstream’s recent agreement to purchase Broadview as a positive move.


More on the merger and acquisitions front, Crown Castle International Corp. CCI, a leading wireless communication tower operator in the U.S. recently inked a deal to acquire privately-held Wilcon Holdings LLC (Wilcon) for approximately $600 million from Pamlico Capital and other unit holders of Wilcon. Wilcon is a premier service provider of dark fiber, lit transport, internet access and colocation services in Southern California.

Read the last Telecom Stock Roundup for Apr 13, 2017.

Recap of the Week’s Most Important Stories

1. Rogers Communications’ first quarter 2017 adjusted earnings per share of 46 cents were above the Zacks Consensus Estimate of 43 cents. Quarterly total revenue came in at around $2,521.8 million, up 6.61% year over year but below the Zacks Consensus Estimate of $2,523.8 million. (Read more: Rogers Communications Q1 Earnings Beat, Revenues Miss)

2. Shaw Communications’ second quarter 2017 adjusted earnings per share of 23 cents were in line with the Zacks Consensus Estimate. Total revenue came in at $986 million, reflecting an increase of 13.3% from the year-ago quarter. However, the top line lagged the Zacks Consensus Estimate of $1,005 million. (Read more: Shaw Communications Q2 Earnings In Line, Revenues Lag)

3. Verizon has decided to install dark fiber based network throughout its footprint in order to support the existing 4G LTE network and more importantly to transition into the upcoming 5G wireless network. Purchase of optical fiber from Corning will help meet Verizon’s bandwidth requirement. (Read more: Verizon Signs Optical Fiber Purchase Deal with Corning)

4. Straight Path has a strong portfolio of 868 spectrum licenses in the high-frequency 28 GHz and 39 GHz bands, which are included in the Federal Communications Commission’s designation for the next generation of wireless broadband services. Verizon is conducting field trials for its upcoming 5G wireless network. The company is preparing for initial deployment of the next-generation 5G wireless networks in the U.S. in 2018. (Read more: Is Verizon Mulling to Bid for Straight Path Communications?)

5. Acquisition of Broadview networks will significantly enhance Windstream’s unified communications (UC) solutions for SMB customers. Broadview Networks offers a broad suite of cloud-based services under the OfficeSuite UC brand. Windstream expects to realize approximately $30 million in annual operating synergies within two years of completing the acquisition. (Read more: Windstream Holdings to Acquire Broadview Networks)

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

0.66%

-0.41%

T

-0.25%

4.14%

S

2.39%

27.53%

TMUS

3.05%

38.43%

CHTR

0.66%

29.25%

TEF

-0.32%

9.76%

AMX

-0.99%

21.15%

CMCSA

0.43%

16.64%

DISH

-5.98%

0.68%

In the last five trading sessions, share price movement of most of the major telecom stocks witnessed a mixed trend. DISH Network lost a substantial (5.98%) while T-Mobile US (3.05%) gained the most. However, in the last six months, the price performances of the major telecom stocks were positive barring Verizon. Among the stocks that gained substantially are T-Mobile US (38.43%), Charter Communications (29.25%), Sprint (27.53%), America Movil (21.15%) and Comcast (16.64%).

What’s Next in the Telecom Space?

We expect a busy week ahead for the telecom sector as behemoths like Verizon and AT&T are slated to release first-quarter 2017 results. America Movil and BCE will also report their first-quarter 2017 results. Further, leading wireless tower operator Crown Castle International will come up with its quarterly results. The market will closely evaluate these results in order to assess industry dynamics and future growth prospects.

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