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Telecom Stock Roundup: Comcast, Charter Communications Collaborate for Wireless

Zacks

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

Two large cable MSOs (multi service operators), namely, Comcast Corp. CMCSA and Charter Communications Inc. CHTR have agreed to jointly work on wireless services businesses. This initiative has been taken to better explore opportunities along with accelerating and enhancing both the companies’ ability to compete in the national wireless marketplace. Both the companies have already inked a Mobile Virtual Network Operator agreement with U.S. telecom behemoth Verizon Communications Inc. VZ to utilize its wireless network.

The cable MSOs plan to augment wireless scalabilities with new ventures like the creation of common operating platforms, technical standards development, device forward and reverse logistics, and emerging wireless technology platforms to name a few.

Meanwhile, the much-hyped merger between CenturyLink Inc. CTL and Level 3 Communications Inc. LVLT has recently faced objections from two California-based consumer advocacy groups as per a FierceTelecom report. The deal was opposed on grounds of consolidation of wholesale and retail fiber in one company. The consumer advocacy groups include TURN, The Greenlining Institute, the California Public Utilities Commission (CPUC) and the California Emerging Technology Fund (CETF).


U.S. national wireless carrier Sprint Corp. S is launching C3PO (Clean CUPS Core for Packet Optimization where CUPS: Control & User Plane Separation), which is an open source NFV/SDN-based mobile core reference solution. The latest launch is basically designed to significantly improve performance of the network core by providing a clean, streamlined, high-performance data plane.

Outside the U.S., three major telecom operators have reported their first quarter of 2017 financial numbers. Leading Canadian telecom operator TELUS Corp. TU reported impressive financial results, wherein both the top line and bottom line outpaced the Zacks Consensus Estimate.

Spanish telecom giant, Telefonica S.A. TEF also reported strong financial results in the first quarter of 2017, wherein both top line and bottom line grew year over year. However, the company’s Brazilian subsidiary Telefonica Brasil SA VIV recently reported mixed financial results in the first quarter of 2017. The top-line grew year over year but the bottom line missed the Zacks Consensus Estimate. Telefonica Brasil currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Read the last Telecom Stock Roundup for May 11, 2017.

Recap of the Week’s Most Important Stories

1. Comcast is expected to launch its new ‘Xfinity Mobile’ wireless service for its existing broadband customers in the next few weeks. The company also bought $1.7 billion in wireless spectrum at a Federal Communications Commission’s (FCC) Broadcast Incentive auction in Apr 2017, to bolster wireless services. Meanwhile, Charter Communications plans to offer wireless service in 2018. (Read more: Comcast, Charter Communications to Join Wireless Wings)

2. The completion of the proposed merger with Level 3 Communications will increase CenturyLink's network by 200,000 route miles of fiber including 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents. CenturyLink's on-net buildings are expected to increase by nearly 75% to approximately 75,000, including 10,000 buildings in Europe, the Middle East and Africa and Latin America. (Read more: CenturyLink-Level 3 Communications Merger Faces Objection)

3. GAAP net income of TELUS was approximately $327.1 million, up 14.6% year over year. GAAP earnings per share were 55 cents, up 14.1% year over year. First-quarter adjusted earnings per share were 56 cents, surpassing the Zacks Consensus Estimate of 52 cents. Total revenue came in at approximately $2,416 million, up 2.9% year over year, and beat the Zacks Consensus Estimate of $2,331 million. (Read more: TELUS Surpasses Earnings and Revenue Estimates in Q1)

4. First-quarter 2017 net income of Telefonica Brasil was approximately $316.9 million, down 18.2% year over year. Earnings per ADR (American Depository Receipt) were 19 cents, a penny shy of the Zacks Consensus Estimate. Net operating revenues were around $3,369.1 million, up 1.5% year over year. (Read more: Telefonica Brasil Q1 Earnings Lag, Revenues Grow Y/Y)

5. Quarterly net income of Telefonica was €779 million (approximately $830 million) compared with a net income of €548 million (approximately $857 million) in the year-ago period. Moreover, first-quarter earnings per ADR came in at 19 cents, up an astonishing 216.7% year over year. Telefonica recorded total revenue of €13,132 million (roughly $13,993 million) in the reported quarter, up 5% year over year. (Read more: Telefonica's Earnings and Revenues Grow Y/Y in Q1)

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

-5.48%

-7.47%

T

-1.73%

-0.27%

S

-7.50%

-0.14%

TMUS

-3.49%

19.26%

CHTR

-3.75%

19.19%

TEF

-2.22%

29.66%

AMX

0.13%

38.10%

CMCSA

-2.95%

11.50%

DISH

1.82%

12.39%

In the last five trading sessions, share price movement of most of major telecom stocks was negative. Sprint (7.50%), Verizon (5.48%), Charter Communications (3.75%) and T-Mobile US (3.49%) lost substantially in the same time period. 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 (38.10%), Telefonica (29.66%), T-Mobile US (19.26%), Charter Communications (19.19%), DISH Network (12.39%) and Comcast (11.50%).

What’s Next in the Telecom Space?

We do not expect any significant change in the telecom industry or in the overall global economic factors that might affect the industry in the coming week. Therefore, we expect stocks to trade in line with the broader market movement at least in the near-term.

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