Last week has been pretty eventful for the telecom industry. Making it to the headlines was national wireless carrier T-Mobile US Inc.’s (TMUS Quick QuoteTMUS - Free Report) decision to introducethe ‘Get Thanked’ program to execute a series of giveaways. Under the program, T-Mobile US will give its customers free Domino’s pizzas, Wendy’s ice-cream, movie rentals and a bunch of other freebies through its T-Mobile Tuesdays app.

While free giveaways and cash credits have been frequently used by wireless players to retain customers in the heavily contested telecom market, none of these came close to T-Mobile US’ latest ‘Stock Up’ promotional campaign – an innovative idea of granting a free full share of the company stock to its postpaid customers.

Meanwhile, U.S. telecom behemoth Verizon Communications Inc. (VZ Quick QuoteVZ - Free Report) submitted a $3 billion bid in the second round to acquire the core Internet-based assets of Yahoo! Inc. . TPG Capital LP also has in all likelihood submitted a second round of bid for Yahoo. Recently, AT&T Inc. (T Quick QuoteT - Free Report) has entered the bidding process for Yahoo’s core assets. Yahoo is likely to conduct at least one more round of bidding and the final offers could change from the initial bids.

In a separate development, Sprint Corp. (S Quick QuoteS - Free Report) unveiled its 5G technology at a Copa America event in Santa Clara, CA. The company exhibited live streaming of videos in 4K resolution with very low latency. The company is working with Nokia Corp. (NOK Quick QuoteNOK - Free Report) and Ericsson LM (ERIC Quick QuoteERIC - Free Report) for testing its 5G network.

Moreover, leading cable MSO (multi service operator) Comcast Corp. (CMCSA Quick QuoteCMCSA - Free Report) has initiated a consumer trial of its DOCSIS 3.1 supported advanced Gigabit Internet service in Nashville. The cable behemoth had started rolling out the service in Atlanta in March this year. The company is offering the service to interested customers for a 36-month period at $70 per month. Upgrading to the new DOCSIS 3.1 will allow Comcast to effectively compete with AT&T’s ongoing Fiber-to-the-Home (FTTH) program.

On the other hand, Level 3 Communications Inc. has sought permission from the U.S. telecom regulator Federal Communications Commission (FCC) to discontinue its legacy voice services based on outdated TDM (time division multiplexing) technology. The service is expected to shut down effective Aug 25, 2016 subject to the FCC’s approval. All affected users will be shifted to high-speed IP-based network before the termination of the legacy voice system.

Latest Update from Incentives Auction

The 600 MHz low-band wireless spectrum auction, popularly known as Incentive Auction, kicked off by the FCC, on Mar 29, 2016, is progressing smoothly. Low-band spectrum is crucial for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities. These airwaves are being freed by TV broadcasters who no longer have any productive use. Completion of the auction process may take more than a year. The freed spectrums cannot be utilized commercially before 2020.

Read the last Telecom Stock Roundup for Jun 3, 2016.

Recap of the Week’s Most Important Stories

1.    Under the ‘Stock up’ plan, T-Mobile US will give each of its postpaid customers a free full share of the company’s common stock as a gesture of gratitude. Customers can also get a share per referral with a cap of 100 shares in a year. However, there will be no new issue of shares, except for a stock buyback from the market and re-issuance of the same to eligible customers. The entire operation will be undertaken by Loyal3, an online brokerage firm.  (read more:T-Mobile US to Offer Stocks & Other Freebies to Customers.)

2.    Yahoo has reportedly received more than 10 initial bids. At present, Verizon appears to be best suited to merge Yahoo with its online platform. Internet-based information service provider giant Yahoo is currently struggling with its core businesses namely mail service, online sports, financial and general news sections and its vital online advertising technology, which includes the video advertising platform, BrightRoll. In Feb 2016, Yahoo had disclosed that it would consider "strategic alternatives" for its core businesses, including an outright sale or a spin-off.   (read more:Did Verizon Submit a Second-Round Bid for Yahoo for $3B?)

3.    Sprint has been losing customers lately and is trying every means to control churn to keep up with the competition. In this regard, the company has been continually making efforts to lure customers from rival carriers through offering attractive promotional plans. This has led to a high cash burn rate and heavy losses for the company over several years. Given the stiff competition in the telecom space, Sprint’s efforts to keep up with other industry leaders, and actively developing and demonstrating its 5G capabilities have been commendable.  (read more:Sprint Presents 5G Capability at Copa America Centenario.)

4.    Level 3 Communications’ legacy voice service mainly consists of Analog PBX Trunk service and Digital PBX Trunk Service. Level 3 Communications has a strong presence in several fields of enterprise networking including data networks, content distribution, managed services, securities, voice cloud and cloud connection. The company stands to benefit from the ongoing trend of large enterprise customers shifting to IP and fiber-based network architecture. (read more:Level 3 Communications to Shut Down Legacy Voice Service.)

5.    In the Incentive Auction, the FCC will resell the spectrums, which it acquired from TV broadcasters to wireless operators, other cable MSOs or tech firms through competitive bidding. The freed 600 MHz TV spectrums will instead be utilized by wireless operators to expand and strengthen their 4G LTE (Long-Term Evolution) networks as well as for the upcoming 5G wireless standard. The bidding for these spectrums began from May 31, 2016. (read more:FCC 600-MHz Low-Band Airwave Auction Remains on Course.)

Price Performance

The following table shows the price movement of the major telecom players over the past week and the last six months.

Over the last five trading sessions, share price movement of the major telecom stocks was positive. Comcast was the only exception losing 0.80%. DISH Network (9.99%) and America Movil (6.64%) gained substantially over the same time frame.

Similarly, over the last six months, the price performance of most of the key telecom stocks witnessed a positive trend. Among the stocks that gained significantly were AT&T (20.93%), T-Mobile US (19.03%) and Verizon (15.33%). On the contrary, America Movil (11.86%) and DISH Network (7.68%) saw their shares depreciating in value.

What’s Next in the Telecom Sector?

We neither foresee any significant change in the telecom industry, nor do we see any macroeconomic factors affecting the industry in the coming week. However, a series of micro and macroeconomic data pertaining to the U.S. economy are slated for release in the coming week. These include retail sales, industrial production, inflation data both PPI (producer price index) and CPI (consumer price index) and policy statement of Federal Open Market Committee (FOMC). We believe these data will be closely monitored by investors and will have an impact on the markets.

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