Telecom Stock Roundup: U.S. Spectrum Auction Sees Record Bidding, Pay-TV Industry in Troubled Waters - Analyst Blog

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The Federal Communications Commission (FCC) recently revealed that ongoing Advanced Wireless Services-3 (AWS-3) spectrum auction has accumulated a record-breaking $24.2 billion after 17 rounds of bidding. The FCC was initially expecting to collect a minimum of $10 billion from this round of airwaves auction.

Altogether 1,614 AWS-3 licenses in the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands are up for auction. These spectrum bands are highly useful in the deployment of 4G LTE services.

Major bidders participating in the auction are Verizon Communications Inc. (VZ), AT&T Inc. (T), T-Mobile US Inc. (TMUS), America Movil SAB de CV (AMX) and DISH Network Corp. (DISH). However, Sprint Corp. (S) is a notable exception as the company has decided to take part in the forthcoming broadcast incentive auction in 2016 instead.

Meanwhile, distressing time for the U.S. pay-TV industry continues as research firm Leichtman Research Group recently reported that the industry lost record high 150,000 subscribers in the third quarter of 2014. The primary reason behind this dismal performance is the availability of low-priced online video-streaming services offered by low-cost online streaming service providers. Video offering, the core business area of cable TV operators, is slipping out of their hands.  

Recap of the Week's Most Important Stories

1.    The ongoing wireless spectrum auction conducted by the FCC has received as many as 70 applications. The Advanced Wireless Services-3 (AWS-3) spectrum auction was initiated on Nov 13, 2014. Altogether, 1,614 AWS-3 licenses will be up for sale in the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands.

The FCC expects to collect a minimum of $10 billion from this round of airwaves auction. The afore-mentioned spectrum bands are highly useful in the deployment of 4G LTE services. (Read More: U.S. AWS-3 Spectrum Auction Witnesses Stepped-up Bidding.)

2.    Research firm Leichtman Research Group recently reported that 13 major U.S. pay-TV operators lost a total of about 150,000 subscribers in the third quarter of 2014 compared with 25,000 in the year-ago quarter. Time Warner Cable Inc. (TWC) lost 182,000, Comcast Corp. (CMCSA) lost 81,000, Cablevision Corp. (CVC) lost 56,000 and Charter Communications Inc. (CHTR) lost 24,000 subscribers. DIRECTV (DTV) and DISH lost a total of 40,000 subscribers.

Verizon and AT&T net gained 216,000 and 114,000 video subscribers, respectively. However, the gain of 330,000 customers actually reflects an 18% drop from the prior-year quarter's customer gain. (Read More: Distressing Time for U.S. Pay-TV as Customer Churn Soars.)

3.    U.S. telecom behemoth AT&T is leaving no stone unturned to attract more customers in a bid to increase revenues. In a limited period offer, the carrier is providing its Mobile Share Value customers a 15 GB shareable data plan for $100. Previously, AT&T customers could avail only 10 GB of data for the same amount.

The company has reduced the price of its data plan for the second time in two months. Both new and existing AT&T customers can avail the scheme.  (Read More: AT&T Betters Data Plan for Users, Adds 5 GB at No Extra Cost.)

4.    Select leading pay-TV operators, content providers and equipment vendors from around the world have combined forces to form the Streaming Video Alliance (SVA) – a new industry forum. The move reflects the common vision shared by the participants with regard to the future of online video services. The group seeks to formulate industry-wide standards for high-scale Internet video services and improve productive efficiency for all providers involved in the process. (Read More: Industry Leaders Unite to Form Streaming Video Alliance.)

5.    According to a report by The Telegraph, UK-based telecom giant Vodafone Group Plc. (VOD) is negotiating with the British Sky Broadcasting Group Plc. to resell Sky's Now TV set-top box (STB) along with its upcoming fixed broadband network offerings. Vodafone has decided to offer fixed-line broadband (Internet) and TV services to its residential customers in the UK from the spring of 2015. The strategy aims at minimizing customer churn rate as an increasing number of the company's subscribers are opting for the bundled services of its competitors.   (Read More: Will Vodafone's Fixed Broadband Offer BSkyB's Now TV?)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-0.65%

+4.99%

T

-0.08%

-0.23%

S

-5.80%

-48.36%

TMUS

-3.21%

-18.73%

VOD

+0.99%

+1.97%

CHL

-1.17%

+24.88%

AMX

+3.59%

+22.58%

CMCSA

+1.46%

+7.73%

DISH

+16.99%

+25.77%

Over the last five trading sessions, the price movement for most of the major telecom stocks was mixed. DISH gained a massive 16.99% whereas Sprint lost the maximum value during the same time period.

However, over the last six months, the price performance of key telecom stocks was mostly positive. DISH and China Mobile witnessed considerable rally in stock prices of 25.77% and 24.88%, respectively while Sprint collapsed a massive 48.36% and T-Mobile US lost 18.73% of value over the same time frame.

What's Next in the Telecom Sector?

The ongoing auction of the AWS-3 spectrum conducted by the FCC will continue in the coming week as well. Investors will closely watch which company finally receives spectrum licenses for which geographical areas. We believe DISH will get special emphasis as the company already builds up a strong portfolio of wireless spectrums but still undecided what to do with these assets.

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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

AT&T INC (T): Free Stock Analysis Report

DIRECTV (DTV): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

AMER MOVIL-ADR (AMX): Free Stock Analysis Report

CABLEVISION SYS (CVC): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

COMCAST CORP A (CMCSA): Free Stock Analysis Report

VODAFONE GP PLC (VOD): Free Stock Analysis Report

CHARTER COMM-A (CHTR): Free Stock Analysis Report

TIME WARNER CAB (TWC): Free Stock Analysis Report

T-MOBILE US INC (TMUS): Free Stock Analysis Report

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