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Telefonica (TEF) Faces Charges for Fusion Price Hikes
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It seems that the holiday season this year wasn’t only celebrations for a few companies. Just after leading wireless chipset manufacturer Qualcomm Inc. (QCOM - Free Report) was charged $865M for curbing market competition, Spanish telecom behemoth Telefonica SA (TEF - Free Report) was slapped a fine.
According to a recent telecompaper report, Telefonica has been charged EUR 6.23 million (around $6.5 million) and EUR 30,000 ($31,304) by the governments of Andalucia and Madrid, respectively on grounds of its price hike for the Fusion package.
The fines follow the filing of complaints by the Spanish consumer protection authority, FACUA. The group has also filed a court case against Telefonica with the hearing scheduled for next March in Madrid.
The Andalucia fine includes EUR 5.36 million ($5.59 million), the amount which was illegally charged from Telefonica customers. Additionally, the Andalucia government charged EUR 870,000 ($0.91 million) for the unfair business practices and deceptive advertisements. Further, in spite of promising stable prices at the launch of Fusion, Telefonica has raised the service cost and has also recently announced another hike.
On Dec 27, Telefonica announced price hike plans for Fusion, effective Feb 2017. However, the price hike has been justified with an increase in the mobile data allowance. Fusion customers with two or four mobile lines will have to pay an extra EUR 5 every month. At the same time, the amount of data included will increase from 6 GB to 16 GB for plans with two lines and from 12 GB to 32 GB with four lines. This offer is likely to give tough competition to the latest offer of 24 GB from Orange S.A.
Meanwhile, there is a provision for subscription cancellation in case customers do not approve of the latest hike. The current price change is the Spanish operator's fourth hike since Jan 2015, with an overall increase of EUR 18 a month.
Price Performance
Shares of Telefonica have /fared worse than the Zacks categorized Diversified Comm Services market on a year-to-date basis due to stiff competition in the domestic and Latin-American markets. The stock has lost 18.35%, while the industry has seen a decline of only 3.65% over the same period.
Rating Cut, Failed IPO Plans
Moreover, Telefonica was recently downgraded by Moody' Investors Service following its debt-reduction advice to the company. The fallout of the company’s IPO plans for its infrastructure division – Telxius – was also a major setback. Telefonica also attempted to establish its U.K. wireless unit, O2 UK, as an IPO to lessen its debt burden.
We believe these headwinds have resulted in Telefonica’s current Zacks Rank #4 (Sell).
Better-ranked stocks in the telecommunication sector include Facebook, Inc. and Western Digital Corporation (WDC - Free Report) , both carrying a Zacks Rank #2 (Buy).
Western Digital Corporations posted a positive earnings surprise in three of the four trailing quarters, the average beat being 5.87%. Meanwhile, Facebook posted a positive earnings surprise in all of the four trailing quarters, with an average beat of 21.11%.
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Telefonica (TEF) Faces Charges for Fusion Price Hikes
It seems that the holiday season this year wasn’t only celebrations for a few companies. Just after leading wireless chipset manufacturer Qualcomm Inc. (QCOM - Free Report) was charged $865M for curbing market competition, Spanish telecom behemoth Telefonica SA (TEF - Free Report) was slapped a fine.
According to a recent telecompaper report, Telefonica has been charged EUR 6.23 million (around $6.5 million) and EUR 30,000 ($31,304) by the governments of Andalucia and Madrid, respectively on grounds of its price hike for the Fusion package.
The fines follow the filing of complaints by the Spanish consumer protection authority, FACUA. The group has also filed a court case against Telefonica with the hearing scheduled for next March in Madrid.
The Andalucia fine includes EUR 5.36 million ($5.59 million), the amount which was illegally charged from Telefonica customers. Additionally, the Andalucia government charged EUR 870,000 ($0.91 million) for the unfair business practices and deceptive advertisements. Further, in spite of promising stable prices at the launch of Fusion, Telefonica has raised the service cost and has also recently announced another hike.
On Dec 27, Telefonica announced price hike plans for Fusion, effective Feb 2017. However, the price hike has been justified with an increase in the mobile data allowance. Fusion customers with two or four mobile lines will have to pay an extra EUR 5 every month. At the same time, the amount of data included will increase from 6 GB to 16 GB for plans with two lines and from 12 GB to 32 GB with four lines. This offer is likely to give tough competition to the latest offer of 24 GB from Orange S.A.
Meanwhile, there is a provision for subscription cancellation in case customers do not approve of the latest hike. The current price change is the Spanish operator's fourth hike since Jan 2015, with an overall increase of EUR 18 a month.
Price Performance
Shares of Telefonica have /fared worse than the Zacks categorized Diversified Comm Services market on a year-to-date basis due to stiff competition in the domestic and Latin-American markets. The stock has lost 18.35%, while the industry has seen a decline of only 3.65% over the same period.
Rating Cut, Failed IPO Plans
Moreover, Telefonica was recently downgraded by Moody' Investors Service following its debt-reduction advice to the company. The fallout of the company’s IPO plans for its infrastructure division – Telxius – was also a major setback. Telefonica also attempted to establish its U.K. wireless unit, O2 UK, as an IPO to lessen its debt burden.
We believe these headwinds have resulted in Telefonica’s current Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks in the Sector
Better-ranked stocks in the telecommunication sector include Facebook, Inc. and Western Digital Corporation (WDC - Free Report) , both carrying a Zacks Rank #2 (Buy).
Western Digital Corporations posted a positive earnings surprise in three of the four trailing quarters, the average beat being 5.87%. Meanwhile, Facebook posted a positive earnings surprise in all of the four trailing quarters, with an average beat of 21.11%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>