Telecom Stock Roundup: FCC Slaps Cramming Charges on Sprint, T-Mobile US Unveils Data Rollover Plan - Analyst Blog

Last week was been pretty eventful for the telecom industry as pricing competition intensified with the introduction of T-Mobile US Inc.'s (TMUS) “Data Stash” plan. The new scheme will allow customers to roll over unused data for a year even after the expiry of the billing period.

Meanwhile, Vodafone Group Plc. (VOD) intends to initiate a mobile virtual network operator (MVNO) service for its multi-national corporate customers in the U.S., utilizing T-Mobile US's wireless network.

In a significant development, the Federal Communications Commission (FCC) is proving unauthorized and deceptive billing (cramming) charges against Sprint Corp. (S). The company may face a $105 million penalty if proved guilty. In the meantime, CenturyLink Inc. (CTL) strengthened its IT offerings after the acquisition of Big Data analytics solution provider Cognilytics.   

Recap of the Week's Most Important Stories

1.    Sprint seems to have landed itself in hot waters with the FCC planning to penalize the company for $105 million on grounds of unauthorized billing. Sprint has received nearly 35,000 customer complaints pertaining to unsolicited charges for text message alerts, sports scores, horoscopes, ring tones and other unwanted services.

The complaints spanned across a three-month period from August to Oct 2013. Such practice of imposing unauthorized and deceptive charges is commonly known as cramming. FCC commissioners are currently reviewing the matter and will shortly vote on the proposed fine. (Read More: Sprint Faces FCC Spat for Forged Billing, Shares Tank 6%.)

2.    T-Mobile US introduced a new data plan designed for the promotion of its “Uncarrier” brand. Named “Data Stash”, the plan will allow the company's wireless subscribers to roll over their unused portion of the existing data limit for another year even after the billing period is over. Data Stash will be launched in Jan 2015.

Additionally, T-Mobile US has started deploying LTE network on its 700 MHz spectrum holdings to enhance its service quality outside major urban areas. Earlier data packet drop was a serious concern in these areas. (Read More: T-Mobile US Unveils Data Rollover Plan, Upgrades Network.)

3.    Vodafone has announced its intensions to launch a MVNO service utilizing the wireless network of T-Mobile US. Vodafone America, the U.S. subsidiary of the company, announced that the service will cater to Vodafone's multinational corporate (MNC) customer who are either based in the U.S. or have a strong presence in the country.

The service is likely to be introduced in late 2015. Vodafone's subscribers in the U.K. and other parts of the globe will get better roaming facility in the U.S. using its MVNO service. (Read More: Vodafone Plans T-Mobile US Tie-Up to Re-enter U.S. Market.)

4.    CenturyLink is currently on a buying spree. Recently, the company announced the acquisition of Cognilytics, a leading provider of advanced predictive analytics and Big Data solutions to mid-sized and large enterprises. Cognilytics specialises in implementing Big Data technologies such as Hadoop and SAP HANA.

Last week, CenturyLink acquired DataGardens, a leading Canadian provider of software for cloud-based disaster recovery-as-a-service (DRaaS) ideally suited for small and mid-sized enterprises. (Read More: CenturyLink Acquires Cognilytics to Strengthen IT Offerings.)

5.    The board of directors of Frontier Communications Corp. (FTR) has approved a hike of 5% in the company's quarterly cash dividend rate, effective from the first quarter of 2015. The quarterly dividend will be increased to 10.5 cents per share from 10 cents paid earlier. We believe the dividend increment is supported by Frontier Communications' strong financials, and reflects the company's confidence in successfully executing and integrating the acquisition of AT&T Inc.'s (T) wireline operations in Connecticut. (Read More: Frontier Communications Hikes Quarterly Dividend by 5%.)

Price Performance

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

Over the last five trading sessions, the share price of most of the major telecom stocks moved south although the movement was marginal. However, one notable exception was Sprint which lost a significant 8.94% over the same time frame as the FCC announced its intensions to impose cramming charges on the company.

Meanwhile, over the last six months, the price performance of key telecom stocks was mixed. China Mobile and DISH witnessed considerable rally in stock prices of 19.96% and 18.03%, respectively, while Sprint collapsed a massive 54.05% and T-Mobile US lost 24.08% of value.

What's Next in the Telecom Sector?

In the coming week, beleaguered mobile handset developer BlackBerry Ltd. (BBRY) will release its third quarter of fiscal 2015 financial results. The market will closely evaluate the results, looking for a possibility of a turnaround for the company, which once dominated the smartphone segment. Investors are also likely to get more information about BlackBerry's recent foray into the healthcare data analytics business and introduction of its BBM money service in Indonesia.  

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 >>