Starting from Oct 18, U.S. telecom giant AT&T Inc. (T - Analyst Report) is offering direct roaming mobile interconnection services to Cuba. AT&T’s customers will now be able to connect through talk, text and data while in Cuba at price rates of $3 per minute on the phone, 50 cents per SMS text, $1.30 per MMS text and $2.05 per MB of data. Notably, in Aug 2016, the company entered into an agreement with Cuba’s state-run telecommunications company Empresa de Telecomunicaciones de Cuba (ETECSA) for roaming services.
President Barack Obama’s decision to normalize U.S. diplomatic and economic relations with Cuba, which has been considerably tensed since 1961, is starting to show results. Under Obama’s administration, new Cuban policy regulations, which have been approved by the Treasury and Commerce departments, aided the U.S. telecommunications industry to gain initial exemptions from the existing embargo to invest in Cuba.
In Mar 2015, U.S.-based IDT Corp had formed a joint venture with ETECSA to provide direct international long-distance service. In Sep 2015, Verizon Communications Inc. (VZ - Analyst Report) became the first U.S. telecom operator to offer roaming wireless services in Cuba. This service was offered through the network of Vodafone Group Plc. (VOD - Analyst Report) . However, in Mar 2016, Verizon entered into an agreement with ETECSA to offer direct roaming mobile interconnection services between the two countries.
Meanwhile, in Nov 2015, Sprint Corp. (S - Analyst Report) signed the first direct roaming wireless service agreement with ETECSA. Earlier, in Apr 2015, Sprint’s prepaid service division – Boost Mobile – had launched an unlimited voice call and text message service plan to improve connectivity between the U.S. and Cuba. Starting at as low as $50 a month, the plan allows Sprint’s customers in the U.S. to make calls to Cuba without a long-term subscription contract.
In May 2016, T-Mobile US Inc. (TMUS - Analyst Report) had also signed an interconnection and roaming wireless service agreement with ETECSA. Notably, T-Mobile US serves the maximum number of customers in the U.S. who are of Cuban descent. Approximately 36.6% of Cuban-born U.S. wireless customers are subscribers of the company. Therefore, it is a logical step for T-Mobile US to establish roaming wireless service in Cuba.
We believe, in the long-term, Cuba may be a boon for the U.S. telecom operators. An opportunity to sell products to 11 million odd customers is a very lucrative and enticing one. Further, with the weakening of communism and the willingness to enter the economic as well as political mainstream, Cuba is poised to become an attractive emerging market in the future. Additionally, Cuba’s geographical proximity to the U.S. is a major positive for these telecom operators from the cost of operations standpoint.
AT&T currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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