Telecom Stock Roundup: Verizon May Revise Yahoo Deal Terms, Rogers Communications Opts For X1

The telecom industry saw strong performances by most of the key stocks last week. Meanwhile, U.S. telecom behemoth Verizon Communications Inc. VZ stole much of the limelight.

After Yahoo! Inc. YHOO disclosed another data breach case on Dec 14, experts now believe that its recent acquisition deal with Verizon for $4.83 billion may be in jeopardy. This was Yahoo’s second revelation of a hacking scandal that might have affected 1 billion of its customers. In Sep 2016, Yahoo had reported data breach of 500 million users during 2014. Notably, there were speculations of a billion dollar discount in the purchase agreement between the parties in the wake of the disclosure.

In a related development, Bloomberg recently reported that Verizon is looking to take over some major companies in the digital media space. The company is systematically diversifying its business model into the digital media platform, targeting the lucrative segments of digital advertising and content creation as well as distribution.

Moreover, Verizon is on track to strengthen its foothold in the fiber space especially in the dark fiber category. Additionally, management has decided to allow Samsung to help customers disable Galaxy Note 7 phones. Notably, Samsung’s Note 7 line of phones has a battery issue which at times has led to explosions during charging.

Last week has been a mixed one for the largest cable MSO (multi service operator) Comcast Corp. CMCSA. Canadian cable behemoth Rogers Communications Inc. RCI recently announced plans to dump its Internet Protocol TV (IPTV) platform and adopt Comcast’s cloud-based X1 video platform. With this, Rogers Communication will be the third cable operator in Canada after Shaw Communications Inc. SJR and Cox Communications to shift to the X1 platform.

On the other hand, Comcast might face a hefty lawsuit fine of around $100 million in relation to its service protection plan. The Attorney General of Washington has sued the company on grounds of offering far less coverage on its $4.99-a-month service protection plan than advertised. Comcast currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, U.S. telecom giant AT&T Inc.’s T Enhanced Control, Orchestration, Management and Policy (ECOMP) virtualization platform has been in the news for quite some time now, courtesy of launch dates and test schedules. Toward this end, leading Canadian telecom operator BCE Inc.’s BCE subsidiary Bell Canada is set to test AT&T’s ECOMP platform.

In a separate development,regional wireless operator, United States Cellular Corp. USM recently conducted joint 5G trials with telecom infrastructure gear maker Ericsson ERIC in Madison, WI. In a separate development, CenturyLink Inc. CTL, a leading regional wireline operator, won a three-year contract to provide the U.S. Senate state offices with a unified communications-as-a-service platform for hosted voice-over-Internet-protocol service. Total contract is worth $11.4 million, which will be distributed as $3.8 million per year.

Read the last Telecom Stock Roundup for Dec 15, 2016.

Recap of the Week’s Most Important Stories

1.    The purchase of Yahoo’s core assets are in line with Verizon’s long-term view to gain traction in the lucrative mobile advertising segment. However, given the persistent erosion of Yahoo’s brand value, Verizon can now consider the data breach to be a “material adverse event.” which will allow it to change the terms of the $4.83 billion transaction. The company can not only seek renegotiation of purchase price and also has the option to opt out of the deal. (read more:  Is Yahoo's Verizon Deal in Danger Post Data Breach Case?)

2.    Verizon’s existing ad programs collect personal data related to its users, which the company now shares with its subsidiary AOL. Mobile video advertising is gradually shifting from the simple selling of banner ads on the mobile Web to automated or programmatic ad selling. Verizon is becoming a leading company that sells mobile ads across numerous websites and applications. Its advertising platform is designed to monetize applications for publishers and developers through the use of data-driven ad targeting. (read more:  Is Verizon Forging Ahead with Digital Media Expansion Plans?)

3.    Comcast’s next-generation web-capable X1 platform offers a hybrid IP/QAM video gateway with an advanced user interface and the ability to port third-party apps that tie into a cloud-based infrastructure. X1 is a cloud-based TV guide which includes recommended web videos and a new mobile application. Using the powerful X1 platform, Rogers Communications aims to provide its customers with an advanced seamless and connected TV experience, at home or outside. (read more: Rogers Communications Drops IPTV for Comcast's X1.)

4.    The recent approval from FCC regarding the $1.8 billion deal to purchase XO Communications Inc.’s fiber-optic network is in line with Verizon’s focus to expand its fiber assets. This XO deal is expected to expand the company’s metro and on-net fiber as well as millimeter wave wireless spectrum holdings in major markets. The XO Communications acquisition will help Verizon serve three of its main domains: business services, consumer FiOS and as a backhaul for its upcoming 5G wireless services. (read more:  Will Verizon Pursue More Fiber-Optic Deals in 2017?)

5.    We are impressed with U.S. Cellular’s strategies like the introduction of a new billing system, continuous rollout of 4G LTE, enhancement of LTE handsets, completion of various spectrum transactions and monetization of non-strategic assets. These business moves might help the company boost subscriber base and arrest churn.We expect U.S. Cellular and Ericsson to continue working together to further develop the 5G technology in sync with their business requirements. (read more:  U.S. Cellular and Ericsson Complete 5G Trials in Wisconsin.)

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

2.59%

-1.96%

T

2.19%

2.57%

S

0.84%

92.01%

TMUS

2.16%

35.41%

VOD

-0.88%

-21.75%

CHL

-0.30%

-5.60%

AMX

2.45%

1.97%

CMCSA

1.39%

13.07%

DISH

-0.70%

13.16%

Over the last five trading sessions, share price movement of most of the major telecom stocks witnessed a positive trend although none of the companies gained or lost considerable value. Similarly, over the last six months, the price performance of most telecom stocks was predominantly positive. Among the stocks that gained significantly are Sprint (92.01%), T-Mobile US (35.41%), DISH Network (13.16%) and Comcast (12.07%). On the other hand, Vodafone lost 21.75% 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.

Zacks' Best Investment Ideas for Long-Term Profit

Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
YAHOO! INC (YHOO): Free Stock Analysis Report
 
ERICSSON LM ADR (ERIC): Free Stock Analysis Report
 
AT&T INC (T): Free Stock Analysis Report
 
BCE INC (BCE): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
SHAW COMMS-CL B (SJR): Free Stock Analysis Report
 
ROGERS COMM CLB (RCI): Free Stock Analysis Report
 
COMCAST CORP A (CMCSA): Free Stock Analysis Report
 
CENTURYLINK INC (CTL): Free Stock Analysis Report
 
US CELLULAR (USM): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Comments on ERIC stock

Do share this awesome post