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Telecom Stock Roundup: Verizon Unveils New Prepaid Plan, Qualcomm Offers Concession for NXP Deal

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Though last week wasn’t been too eventful for telecom companies, a few developments were worth noting.

Verizon Communications Inc. VZ is reportedly launching customer-friendly prepaid family plans to attract more subscribers. Prepaid lines include unlimited talk, text and data tiers along with 3GB, 7GB, 10GB and Unlimited data. Each data size is priced separately for the first line, followed by discounted rate from second to fifth lines to help cut down on costs. With Verizon’s new service, customers can choose a single specific plan for each member of the family, enabling them to customize individual monthly data plans.

Moreover, the U.S. telecom behemoth is reportedly merging its video-streaming service, Go 90, into other digital platforms. Go90’s primary content strategy is now focused on video content that slots between the less-than-10-minute clips, which dominate social media and the more-than-30-minute shows and films popular on SVODs (subscription video-on-demand) like Amazon.com AMZN, Hulu and Netflix Inc. NFLX.

Meanwhile, Verizon and T-Mobile US Inc. TMUS are offering latest versions of Pixel 2 and Pixel 2 XL to attract customers. Pixel 2 and Pixel 2 XL are the latest series of Alphabet Inc.’s (GOOGL) Google smartphones. Both the phones will come with Android 8.0 Oreo mobile operating system.


In a separate development, T-Mobile US recently requested for Special Temporary Authority (STA) from the Federal Communications Commission (FCC) to test pre-commercial LTE Advanced (LTE-A) in El Paso, Texas, and Augusta, Georgia. T-Mobile US currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Leading mobile chipset developer Qualcomm Inc. QCOM recently revised its proposed deal to takeover NXP Semiconductors N.V. NXPI in order to get regulatory nod from the European Commission (EC), which is a major part of the European Union. Notably, Qualcomm’s proposed acquisition of NXP Semiconductors is facing a few problems.

Regional wireline service provider Frontier Communications Corp. FTR has reportedly disclosed plans of conducting tests to deploy fixed broadband. The company aims to accelerate rural broadband, while trying to abide by the FCC’s CAF-II funds. Additionally,CenturyLink Inc. CTL, a leading regional wireline service provider, is reportedly seeking permission from the FCC to conduct trials of fixed wireless spectrum bands in the range of 3.54 GHz to 3.70 GHz frequency band.

Read the last Telecom Stock Roundup for Oct 06, 2017.

Recap of the Week’s Most Important Stories

1. Verizon had previously been targeting prepaid customers. In April, Verizon introduced its unlimited prepaid plan with unlimited data, talk and text for $80 a month. Video streaming was limited up to 480p. The wireless prepaid industry is getting more competitive with every passing day. The industry is also struggling with saturation issues. The gap between prepaid and postpaid average revenue per user has narrowed significantly, forcing telecom biggies to turn their attention to domestic prepaid mobile service business. (Read more: Verizon to Gain From Customer-Friendly Prepaid Plans)

2. Verizon confirms no changes in the overall content strategy of Go90. Till date, almost 15% of Go90's content (mostly originals) has been distributed to AOL Video. AOL Inc. — a major player in the digital content and online advertising space — was acquired by Verizon in June 2015. Verizon has further plans to expand this effort to Yahoo's brands before the end of the year. In fact, the company is beginning to distribute Go90 content across some of its Oath brands. (Read more: Verizon on Track to Merge Go90 Under Oath Brands)

3. On Oct 27, 2016, Qualcomm entered into a definitive agreement with the Netherlands-based mobile chipset giant NXP Semiconductors to buy it. In June 2017, the EC had launched a thorough investigation into the proposed acquisition. The EC will probe in depth to see if the deal will lead to higher prices, exclusion of rival chipset suppliers and reduced innovation in the semiconductor industry. The merged entity is likely to command strong market positions with an extensive portfolio of baseband chipsets and chips for near-field communications. (Read more :Qualcomm Offers Concession to EU for NXP Semiconductors Deal)

4. T-Mobile US will conduct LTE-A trial runs using multiple spectrum bands, 700 MHz, PCS and AWS spectrum licensed to T-Mobile US as well as AWS-3 spectrum that is held by the FCC. The company plans to transmit data using 2155-2160 MHz and 1755-1760 MHz bands in El Paso, and 2165-2170 MHz and 1765-1770 MHz bands in Augusta. The LTE-Advanced network is likely to raise the data packet transmission speed by more than 50%. (Read more: T-Mobile US Seeks FCC Permission for LTE-A Network Trial)

5. T-Mobile US is reportedly offering up to 50% cash back on the purchase of the Pixel 2 phone, if switched on to the T-Mobile US network. T-Mobile US will give a $325 instant cash rebate in the form of a prepaid Mastercard gift card. The cash rebate for 64 GB Pixel 2 is almost half the price of the phone when sold in Google's own store. The plan aims to lure customers to the T-Mobile network with their new Pixel 2 or Pixel 2 XL. (Read more: Is T-Mobile US' Pixel Offering Better Than Verizon's?)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-1.29%

1.05%

T

-2.50%

-4.38%

S

-7.52%

-14.30%

TMUS

-0.78%

-4.30%

CHTR

-1.24%

10.64%

TEF

0.83%

-1.90%

AMX

-1.13%

19.77%

CMCSA

-2.75%

0.51%

DISH

-4.76%

-18.73%

In the last five trading sessions, share price movement of major telecom stocks was negative barring Telefonica. Sprint (7.52%) and DISH Network (4.76%) lost significantly during this period. However, price performances of most of the major telecom stocks witnessed a mixed trend in the last six months. While America Movil (19.77%) and Charter Communications (10.64%) gained remarkably, DISH Network (18.73%) and Sprint (14.30%) lost substantially in the same time frame.

What’s Next in the Telecom Space?

We expect a busy week for the telecom sector as several large sector participants like Verizon Communications, Rogers Communications and Crown Castle International will release their third-quarter 2017 results. The market will closely evaluate these results in order to assess industry dynamics and future growth prospects.

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