Telecoms Line Up To Offer iPhone-6 Plan
Zacks Investment Research | Sep 12, 2014 07:42AM ET
Last week, the telecom sector witnessed several big business deals and new data plan introductions by wireless carriers. AT&T (NYSE:T) tied up with Telefonica (MADRID:TEF) to expand its home-security business in Europe. DISH Network (NASDAQ:DISH) once again trying to acquire T-Mobile (NYSE:TMUS). CenturyLink (NYSE:CTL) is reportedly eyeing Rackspace as a potential acquisition. Meanwhile, Verizon Communications (NYSE:VZ) and Sprint (NYSE:S) have come up with new plans and contracts for recently launched iPhone 6.
On the other hand, a surge in WiFi network demand has become a major concern for large wireless operators. At present, most of the data transfer by smartphone users is taking place over WiFi networks. The cloud-managed WiFi market has become a major growth driver for WiFi operators as increasing number of large and mid-sized business enterprises are rapidly adopting this technology.
Recap of the Week’s Most Important Stories
1. AT&T and Telefonica have joined hands to promote Digital Life home-security service outside the U.S. market by conducting limited trials in Europe. AT&T’s home monitoring and automation product - Digital Life home-security service has been gaining grounds in the U.S. following 2013 launch and now to branch out, the company is seeking international expansion plan in collaboration with Telefonica. (Read More: AT&T Ties Up with Telefonica to Expand Digital Life Offshore. )
2. CenturyLink is reportedly seeking to expand its cloud business with a prospective acquisition of Rackspace Hosting Inc. Although no official announcement has been made, going by the market reports off late the company is in talks with Rackspace and also considering internal review of its strategic acquisition plans. Reportedly, the prospective buy out will bring additional Internet and cloud service business to CenturyLink. (Read More: Is Rackspace Buyout in the Cards for CenturyLink? )
3. Recently, Bloomberg reported that satellite TV operator DISH Networkonce again expressed its interest to acquire T-Mobile US and is presently in talks with Deutsche Telekom OTC (OTC:DTEGF), the parent company of T-Mobile US. Bloomberg also reported that DISH may seriously pursue the deal after the completion of the upcoming airwaves auction for advanced wireless access (AWS-3) scheduled to be conducted by the Federal Communication Commission on Nov. 13. (Read More: Is DISH Network Eyeing T-Mobile US Takeover Again? )
4. With the foray of Apple's (NASDAQ:AAPL) iPhone 6, Verizon Communications has come up with yet another contract plan to attract new and existing customers. The company is now offering iPhone 6 to customers under a two years contract in exchange of their old iPhones. According to reports, the new trade in old phone offer by Verizon makes the new device by iPhone almost free with only additional two years contract.
Get The News You Want
While Verizon is busy promoting its 2 year contract plus a free iPhone 6, Sprint has also come up with its new $50 unlimited plan offered with iPhone 6. In addition, Sprint’s new campaign “iPhone for life” adopts a new strategy of offering customers with a new iPhone every two years upon signing up contract. (Read More: Verizon, Sprint Sell iPhone 6, Add New Plans & Contracts. )
5. Thriving WiFi networks throughout the U.S. has become a major concern for large wireless operators. A recent study conducted by Adobe Systems revealed that currently more than 50% data transmission by smartphone users is taking place over WiFi networks. If this trend continues, it may spell doom for national wireless service providers, who have invested significantly for the installation of high-speed 4G LTE networks. (Read More: WiFi Hotspots Boom in U.S. May Hurt Wireless Operators. )
Price Performance
The following table shows the price movement of the major telecom players over the past week and during the last 6 months.
Over the last five trading session, most of the telecom stocks lost value. Sprint and Comcast (NASDAQ:CMCSA) emerged as top gainers over the last 5 trading sessions whereas Vodafone and Verizon lost the most over the same time frame. During the last 6 months, China Mobile Games & Entertainment (NASDAQ:China Mobile) and American Movil witnessed considerable rally in stock prices of 33.47% and 28.73% respectively. On the other hand, Sprint collapsed a significant 28.41% over the same time period.
What’s next in the Telecom Sector?
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. Therefore, we expect stocks to trade in line with the broader market movement.
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