In the last week, the ongoing consolidation trend in the U.S. cable TV industry gained momentum from the recent signing of agreement by Charter Communications Inc. (NASDAQ:CHTR) to acquire both Time Warner Cable Inc (NYSE:TWC) and privately held Bright House Networks LLC for $78.7 billion and $10.4 billion respectively.
Together the merged entity of Charter Communications, Time Warner Cable and Bright House will serve 23.9 million customers across 41 states. However, the figure will be below Federal Communications Commission’s (FCC) 30% market share benchmark.
Notably, in the last month, Comcast Corp (NASDAQ:CMCSA) had put an end to its 14-month long negotiation of the $45.2 billion takeover deal concerning Time Warner Cable owing to strong reservations expressed by the FCC and the Department of Justice.
Meanwhile, Cablevision Systems Corp (NYSE:CVC) sued Verizon Communications Inc. (NYSE:VZ) accusing false FiOS claims. This is not the first time that Cablevision is suing Verizon. In Jan 2015, Cablevision had sued Verizon, calling its advertising claims related to WiFi connections false and misleading. The lawsuit is still pending. (Read the last Telecom Stock Roundup for May 14, 2015.)
Recap of the Week’s Most Important Stories
1. Putting speculations to rest, Charter Communications has finally made two major announcements pertaining to pending deals. The company has reached an agreement to buy Time Warner Cable – the second largest cable MSO in the U.S. The total value of the deal stands at $78.7 billion, including debt. Also, Charter will take over Bright House –the sixth largest U.S. cable operator – for $10.4 billion. Both deals are expected to be closed by the end of 2015. The Charter Communications-Time Warner Cable-Bright House deal may face close scrutiny by regulator Federal Communications Commission. (Read More: Charter to Buy Time Warner Cable, Will FCC Approve?)
2. Leading cable MSO, Cablevision System has filed a lawsuit against wireless behemoth Verizon Communications with the U.S. District Court in Manhattan, NY. With its latest filing, Cablevision is looking at a court verdict to verify whether Verizon’s claim that its FiOS service exclusively uses fiber optics cable is true or not. Cablevision has now accused Verizon of designing its advertisements in a deceptive manner to differentiate its FiOS service from Cablevision's Optimum Online service. While misleading consumers, this has also dented Cablevision’s competitive advantage in the cable TV space. (Read More: Cablevision Sues Verizon Again, Accuses False FiOS Claim.)
3. Qualcomm (NASDAQ:QCOM) has signed accelerated share repurchase agreements with two financial organizations to buy back a total of $5 billion of its common stock. Per the agreements, Qualcomm will receive an initial delivery of about 57.7 million shares. However, the exact number of the shares to be repurchased will be determined by the volume-weighted average share price of the company’s common stock during the transaction period, minus a discount and subject to amendments. (Read More: Qualcomm Starts Accelerated $5B Share Repurchase Plans.)
4. U.S. telecom behemoth AT&T Inc (NYSE:T) plans to add a new member to its tablet family with the upcoming launch of LG G Pad F 8.0. The device will be available with the carrier effective May 29. We believe this latest addition to its existing pool of smart devices will pep up AT&T’s popularity, thereby expanding its customer base. Customers can get G Pad F 8.0 at zero upfront payment by taking up 20 monthly installments of $12.50 each.
Alternately, the phone will be available at a price of $149.99 with a fresh two-year contract with the carrier. Customers can also add the device to an existing or new Mobile Share Value plan for only $10 per month. (Read More: AT&T Perks Up Tablet Portfolio with LG G Pad F 8.0.)
5. Ushering in good news for smartphone lovers, wireless service provider United States Cellular Corp. – a subsidiary of Telephone and Data Systems Inc. (NYSE:TDS) – has announced pre-order and pricing details for LG's latest smartphone, G4. U.S. Cellular will take pre-orders for G4 effective May 29, although the phone will be available at stores from around Jun 4.
Customers can get G4 at zero upfront payment using U.S. Cellular's equipment installment option. Under this option, customers will have to make 20 monthly payments of $29.50 each for the Gold and Metallic Gray handsets and $30.50 for the Black Leather one. (Read More: US Cellular Introduces LG G4, Preorders to Begin from May 29.)
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, share price movement of most major telecom stocks was positive barring Sprint Corp. (NYSE:S). T-Mobile US Inc. (NYSE:TMUS) rallied an impressive 12.35% during the same time frame. Likewise, over the last six months, the price performance of key telecom stocks was mostly positive. Although DISH Network (NASDAQ:DISH) and America Movil SAB de CV (NYSE:AMX) lost a considerable 11.91% and 11.77%, respectively, T-Mobile US and China Mobile rallied a respective 32.41% and 10.39%, over the same time frame.
What’s Next in the Telecom Sector?
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.