Telecom Stock Roundup: Verizon To Suffer From Workers' Strike, Polycom Receives New Takeover Bid
Zacks Investment Research | May 25, 2016 11:43PM ET
The U.S. telecom industry remained rather subdued last week. Nevertheless, a few developments were worth noting. U.S. telecom behemoth Verizon Communications Inc. (NYSE:VZ) warned that the company’s second-quarter 2016 financial results may be affected by the ongoing strike of its wireline and cable TV workers which started from Apr 13, 2016.
Verizon and the striking unions, The Communications Workers of America (CWA) and International Brotherhood of Electrical Workers (IBEW), are currently at a stalemate over a new labor contract. The company’s wireline employees have been working out of contract since August last year. The CWA said nearly 40,000 workers have gone on strike.
Lowell McAdam, CEO of Verizon recently stated thatthe company is currently on track with respect to repairing and maintenance issues of the existing installed bases. However, the number of new installations of FiOS high-speed Internet and FiOS pay-TV has dropped significantly. As a result, the company may suffer high-speed broadband and pay-TV customer attrition. The situation may become even worse going forward if the strike continues for an indefinite period of time.
Meanwhile, videoconferencing giant Polycom Inc. (NASDAQ:PLCM) recently received a new takeover bid from an unnamed private equity (PE) firm. Notably, IP-based integrated communications solutions provider Mitel Networks Corp. (NASDAQ:MITL) had placed a bid of around $1.96 billion to acquire Polycom this April.
The PE firm offered two options to Polycom. Under Option 1, Polycom stockholders would receive a cash dividend of $11 per share and the private equity firm would purchase $650 million in shares of a new convertible preferred stock of Polycom. Resultantly, the PE firm will get hold of a 56% stake of the company and the remaining 44% will stay with Polycom’s existing shareholders. Under Option 2, the PE firm will make Polycom a private entity in an offer worth $11.5 per share in cash and a contingent value right worth up to $3 per share.
Several interesting developments took place outside the U.S. in the past one week. According to a recent report by Bloomberg, Spanish telecom giant Telefonica SA (NYSE:TEF) is in talks with several banks to conduct an initial public offering (IPO) of its infrastructure division Telxius. Telefonica is aiming to raise around €4 - €5 billion ($4.5 - $5.6 billion) from the Telxius IPO. The spin-off of an infrastructure unit is not new in the global telecom space. Earlier America Movil SAB (NYSE:AMX) had spun off its Telesite infrastructure division and Telecom Italia SpA (NYSE:TI) also opted for the same.
As per a recent report by NextTV Latam, Mexican telecom behemoth America Movil is eyeing Argentina as its new growth area. The report stated that America Movil’s owner Carlos Slim recently had a meeting with the Argentine president Mauricio Macri to assess investment opportunities in Argentina’s state-owned telecom operator Arsat and Buenos Aires-based cable company TeleCentro.
The deal, if it materializes, may see America Movil acquiring a stake in Refefo Federal Fibre-Optic Network as well as on the Arsat-2 satellite. Notably, America Movil already has a footprint in Argentina’s telecom market through its Claro and Telmex Argentina subsidiaries. However, the company is barred from providing pay-TV services under the provisions of the Broadcast Media and Telecommunications Law.
Liberty Global Plc. (NASDAQ:LBTYA) - a leading cable MSO (multi service operator) in Europe and Latin America - recently took over a major Caribbean cable operator – Cable & Wireless Communications Plc. The deal was valued at approximately $7.4 billion on an enterprise value basis. Cable & Wireless will be integrated into Liberty Global’s Latin American and Caribbean group (the “LiLAC Group”).
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