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Telecom Stock Roundup: AT&T to Divest Media Assets, CommScope-Altice Deal & More
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The U.S. telecom stocks have witnessed a steady downtrend over the past five trading days given the acute demand-supply imbalance, as the industry faced essential fiber materials and labor shortage, affecting the expansion and rollout of new broadband networks. As more workers return to the labor force with the mass rollout of vaccines and reopening of facilities, pent-up demand from post-pandemic revival and stimulus checks is likely to be gradually addressed. The industry further witnessed a game-changing deal in the past week that reshaped the sector dynamics and probably accelerated the downturn.
The deal shook the concept of ‘bigger is better’ for big telecom powerhouses that had earlier considered vertical merger to be the ideal way to move forward. These telecom firms believed that a core communications firm cannot rely exclusively on content, nor can a media firm solely depend on wholesale distribution models to sustain in a dynamic environment. However, most of these colossal telecom conglomerates have now shed their baggage to be nimble and concentrate more on their telecommunications businesses – offering a precursor that the era of telecom-media conglomerates is as good as over.
Meanwhile, Democratic lawmaker Chuck Schumer unveiled a revised bipartisan legislation to approve $52 billion for boosting domestic production of semiconductor chips and R&D activities over the next five years. The funding proposal will be included in the revised bill that the Senate is likely to take up this week. Samsung Electronics is also reportedly inching closer to develop a new chip-making factory in the United States for capacity expansion.
Further, President Biden has extended the deadline for trading by two weeks with certain China-based entities that are deemed to have close ties with the communist military. The new restrictions are presently scheduled to take effect from Jun 11. This follows a NYSE move last week to reject appeals by three telecom firms — China Mobile, China Telecom, and China Unicom — to annul their delisting plans from the exchange after another China-based telecom firm Xiaomi was taken off the U.S. government blacklist.
Regarding company-specific news, divestment, strategic deal, earnings, and collaborations primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. AT&T Inc. (T - Free Report) has inked a definitive agreement with Discovery, Inc. to spin off its media assets and merge them with the complementary assets of the latter to form a standalone global entertainment company amid continuous cord-cutting in U.S. households. The transaction will be structured as Reverse Morris Trust that refers to a merger with another company in a tax-free transfer. AT&T will receive $43 billion in a combination of cash and debt securities and will own 71% of the new entity, while Discovery will own the remainder.
The cash resources are likely to be utilized to augment its network infrastructure throughout the country and trim its huge debt burden. Moreover, a focused entertainment company is likely to be better placed to capitalize on the booming direct-to-consumer streaming services market and unlock value from media assets.
2. CommScope Holding Company, Inc. (COMM - Free Report) has secured a contract for an undisclosed amount from Altice USA, Inc. (ATUS - Free Report) to deploy its video advertising solutions for the latter’s a4 advertising platform. This is likely to enable Altice to better reach its customers through targeted advertisements and improve the quality and effectiveness of marketing messages through existing set-top video system and next-generation IP video platform.
Notably, a4 selected the CommScope Manifest Delivery Controller solution to insert addressable ads into its IP video service. It also deployed the CommScope SkyVision Back Office and XMS Ad Insertion Servers, which provide reliable advertising operations and efficient workflow management to insert targeted ads across Optimum set-tops. These solutions are likely to help operators and content providers monetize premium video content through targeted advertising and reduce churn rate by offering compelling personalized content.
3. Plantronics, Inc. reported healthy fourth-quarter fiscal 2021 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate. However, investors were disappointed as the company revealed that it will continue experiencing tightness in its supply chain due to the global semiconductor chip shortage, likely hurting near-term revenues.
Quarterly non-GAAP net income came in at $53.6 million or $1.23 per share compared with $11.9 million or 30 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 30 cents. Quarterly total GAAP revenues grew 18.2% year over year to $476.2 million. The growth was primarily driven by video, which more than doubled to a record high, and professional headsets, which grew 20% from the prior-year quarter. The top line surpassed the consensus estimate of $450 million.
4. Ciena Corporation’s (CIEN - Free Report) unit, Blue Planet, recently collaborated with the U.K.-based communication service provider, Neos Networks, to deploy its avant-garde intelligent automation software across the latter’s network with end-to-end visibility backed by a streamlined infrastructure. Dubbed Blue Planet Multi-Domain Service Orchestration (MDSO), the solution automates service provisioning across Neos Networks’ multi-vendor and multi-layer transport network architecture.
Blue Planet’s MDSO boosts service transformation so that communications service providers can adopt highly virtualized and cloud-based service models on the back of a resilient operational environment. Impressively, the MDSO is not only known for its cost-savings feature but is also recognized for enabling seamless integration of emerging resources and technologies with a fully automated closed-loop service lifecycle management.
5. Nokia Corporation (NOK - Free Report) has announced that it will supply its Digital Operations software, cloud infrastructure software and AirFrame servers to boost the nationwide network of PLDT and its wireless subsidiary Smart Communications. PLDT is a leading telecommunications and digital services provider in the Philippines.
The deployment will enable PLDT and Smart to improve their integrated network’s efficiency and reduce operating costs for delivering innovative services. Nokia will deploy its Digital Operations software to automate the round-trip lifecycle management of network functions.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, Qualcomm has been the best performer with its stock gaining 4.6%, while AT&T declined the most with its stock falling 10.4%.
Over the past six months, Arista has been the best performer with its stock appreciating 17%, while Bandwidth declined the most with its stock falling 32.8%.
Over the past six months, the Zacks Telecommunications Services industry has gained 10.3% while the S&P 500 rallied 15.5%.
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued on how the administration implements key policy changes to safeguard the interests of the industry.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Telecom Stock Roundup: AT&T to Divest Media Assets, CommScope-Altice Deal & More
The U.S. telecom stocks have witnessed a steady downtrend over the past five trading days given the acute demand-supply imbalance, as the industry faced essential fiber materials and labor shortage, affecting the expansion and rollout of new broadband networks. As more workers return to the labor force with the mass rollout of vaccines and reopening of facilities, pent-up demand from post-pandemic revival and stimulus checks is likely to be gradually addressed. The industry further witnessed a game-changing deal in the past week that reshaped the sector dynamics and probably accelerated the downturn.
The deal shook the concept of ‘bigger is better’ for big telecom powerhouses that had earlier considered vertical merger to be the ideal way to move forward. These telecom firms believed that a core communications firm cannot rely exclusively on content, nor can a media firm solely depend on wholesale distribution models to sustain in a dynamic environment. However, most of these colossal telecom conglomerates have now shed their baggage to be nimble and concentrate more on their telecommunications businesses – offering a precursor that the era of telecom-media conglomerates is as good as over.
Meanwhile, Democratic lawmaker Chuck Schumer unveiled a revised bipartisan legislation to approve $52 billion for boosting domestic production of semiconductor chips and R&D activities over the next five years. The funding proposal will be included in the revised bill that the Senate is likely to take up this week. Samsung Electronics is also reportedly inching closer to develop a new chip-making factory in the United States for capacity expansion.
Further, President Biden has extended the deadline for trading by two weeks with certain China-based entities that are deemed to have close ties with the communist military. The new restrictions are presently scheduled to take effect from Jun 11. This follows a NYSE move last week to reject appeals by three telecom firms — China Mobile, China Telecom, and China Unicom — to annul their delisting plans from the exchange after another China-based telecom firm Xiaomi was taken off the U.S. government blacklist.
Regarding company-specific news, divestment, strategic deal, earnings, and collaborations primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. AT&T Inc. (T - Free Report) has inked a definitive agreement with Discovery, Inc. to spin off its media assets and merge them with the complementary assets of the latter to form a standalone global entertainment company amid continuous cord-cutting in U.S. households. The transaction will be structured as Reverse Morris Trust that refers to a merger with another company in a tax-free transfer. AT&T will receive $43 billion in a combination of cash and debt securities and will own 71% of the new entity, while Discovery will own the remainder.
The cash resources are likely to be utilized to augment its network infrastructure throughout the country and trim its huge debt burden. Moreover, a focused entertainment company is likely to be better placed to capitalize on the booming direct-to-consumer streaming services market and unlock value from media assets.
2. CommScope Holding Company, Inc. (COMM - Free Report) has secured a contract for an undisclosed amount from Altice USA, Inc. (ATUS - Free Report) to deploy its video advertising solutions for the latter’s a4 advertising platform. This is likely to enable Altice to better reach its customers through targeted advertisements and improve the quality and effectiveness of marketing messages through existing set-top video system and next-generation IP video platform.
Notably, a4 selected the CommScope Manifest Delivery Controller solution to insert addressable ads into its IP video service. It also deployed the CommScope SkyVision Back Office and XMS Ad Insertion Servers, which provide reliable advertising operations and efficient workflow management to insert targeted ads across Optimum set-tops. These solutions are likely to help operators and content providers monetize premium video content through targeted advertising and reduce churn rate by offering compelling personalized content.
3. Plantronics, Inc. reported healthy fourth-quarter fiscal 2021 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate. However, investors were disappointed as the company revealed that it will continue experiencing tightness in its supply chain due to the global semiconductor chip shortage, likely hurting near-term revenues.
Quarterly non-GAAP net income came in at $53.6 million or $1.23 per share compared with $11.9 million or 30 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 30 cents. Quarterly total GAAP revenues grew 18.2% year over year to $476.2 million. The growth was primarily driven by video, which more than doubled to a record high, and professional headsets, which grew 20% from the prior-year quarter. The top line surpassed the consensus estimate of $450 million.
4. Ciena Corporation’s (CIEN - Free Report) unit, Blue Planet, recently collaborated with the U.K.-based communication service provider, Neos Networks, to deploy its avant-garde intelligent automation software across the latter’s network with end-to-end visibility backed by a streamlined infrastructure. Dubbed Blue Planet Multi-Domain Service Orchestration (MDSO), the solution automates service provisioning across Neos Networks’ multi-vendor and multi-layer transport network architecture.
Blue Planet’s MDSO boosts service transformation so that communications service providers can adopt highly virtualized and cloud-based service models on the back of a resilient operational environment. Impressively, the MDSO is not only known for its cost-savings feature but is also recognized for enabling seamless integration of emerging resources and technologies with a fully automated closed-loop service lifecycle management.
5. Nokia Corporation (NOK - Free Report) has announced that it will supply its Digital Operations software, cloud infrastructure software and AirFrame servers to boost the nationwide network of PLDT and its wireless subsidiary Smart Communications. PLDT is a leading telecommunications and digital services provider in the Philippines.
The deployment will enable PLDT and Smart to improve their integrated network’s efficiency and reduce operating costs for delivering innovative services. Nokia will deploy its Digital Operations software to automate the round-trip lifecycle management of network functions.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, Qualcomm has been the best performer with its stock gaining 4.6%, while AT&T declined the most with its stock falling 10.4%.
Over the past six months, Arista has been the best performer with its stock appreciating 17%, while Bandwidth declined the most with its stock falling 32.8%.
Over the past six months, the Zacks Telecommunications Services industry has gained 10.3% while the S&P 500 rallied 15.5%.
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued on how the administration implements key policy changes to safeguard the interests of the industry.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>