Telecom Stock Roundup: AWS-3 Spectrum Auction Sees Sky-High Bids, Cable MSOs Lead the Broadband Market

The Federal Communications Commission (:FCC) recently revealed that ongoing Advanced Wireless Services-3 (AWS-3) spectrum auction attracted $38.2 billion worth of bids so far which broke all previous records. Altogether, 1,614 AWS-3 licenses in the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands are up for sale. These spectrum bands are highly useful in the deployment of 4G LTE (Long-term Evolution) services.

Major bidders participating in the auction are Verizon Communications Inc. (VZ), AT&T Inc. (T), T-Mobile US Inc. (TMUS), America Movil SAB de CV (AMX) and DISH Network Corp. (DISH). However, Sprint Corp. (S) is a notable exception as the company has decided to take part in the forthcoming broadcast incentive auction in 2016 instead.

Meanwhile, cable MSOs (multi service operators) have strengthened their foothold in the U.S. high-speed broadband (Internet) market outpacing telecom operators. A recent report by Leichtman Research Group Inc. reveals that 17 large cable TV and telecom operators together had approximately 85.6 million high-speed Internet subscribers at the end of the third quarter of 2014. Of this, cable MSOs command 60% while the remaining 40% were serviced by telecom operators.

Recap of the Week’s Most Important Stories

1. The ongoing Advanced Wireless Servies-3 (AWS-3) spectrum auction conducted by the Federal Communications Commission (:FCC) has accumulated a record-breaking $34 billion, breezing past the regulator’s initial estimate of a little over $10 billion. In 2008, the FCC conducted wireless spectrum auction had accumulated a total of $19.6 billion. The AWS-3 spectrum auction, which was initiated on Nov 13, 2014, has received as many as 70 applications. (Read More: U.S. AWS-3 Spectrum Bids Break Records, Top FCC Estimate.)

2. A recent report by Leichtman Research Group Inc. (:LRG) reveals that the cable MSOs (Multi Service Operators) in the U.S. have successfully maintained their lead over telecom operators in the high-speed broadband (Internet) market. For the first-time in the 65-year long history of the cable TV Industry, cable MSOs outpaced telecom operators in the high- speed broadband market during the second quarter of 2014. LRG’s report stated that cable MSOs further consolidated their positions in the third quarter of 2014. (Read More: Cable MSOs Maintain Lead in U.S. Broadband Services Market.)

3. With Thanksgiving just around the corner, the demand for turkey dishes is on the rise. Americans consume about 20% of the annual turkey meat produced in the country on this particular day alone. Apart from this delicacy, there is another attraction from the land of Turkey, which may also help investors gain considerably in the stock market. Turkcell Iletisim Hizmetleri AS (TKC), the largest wireless carrier in Turkey is likely to maintain its strong momentum in the stock market.

As of Sep 30, 2014, the company had 34.7 million subscribers in Turkey. Currently, 99.62% of the company’s total footprint is covered with 2G network whereas 88.09% fall under 3G network coverage. Turkcell also operates in nine countries in Asia and Europe through various wholly owned or partially owned subsidiaries. (Read More: Turkcell Looking Up this Thanksgiving, Should you Invest?)

4. According to a recent report by Bloomberg, German telecom carrier Deutsche Telekom AG announced that T-Mobile USstill remains an attractive takeover target for several telecom, cable TV and satellite TV operators. Deutsche Telekom is the parent company of T-Mobile US, the fourth largest telecom operator in the U.S. Bloomberg reported that Deutsche Telekom’s Chief Executive Officer Timotheus Hoettges has named Comcast, America Movil and DISH Network as some of the potential new suitors for T-Mobile US. However, none of these companies have confirmed the news.(Read More: Are Telecom/TV Operators Still Interested in T-Mobile?)

5. Comcast Corp. (CMCSA), the largest cable MSO (multi service operator) in the U.S. isabout to launch an innovative service called “Ethernet@Home”. This new offering will perform as an Ethernet Everywhere service thorough which a person will enjoy an extended and secured Ethernet connectivity from office to residence. Comcast is expected to launch Ethernet@Home this coming month. Ethernet Everywhere, service will undoubtedly solidify Comcast’s footprint in the metro Ethernet market.Metro Ethernet service is a part of the cable MSOs’ small and mid-sized (SMB) business service division. (Read More: Comcast to Offer Innovative Ethernet Everywhere Service.)

Price Performance

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

Over the last five trading sessions, the price movement for most of the major telecom stocks was positive. Sprint gained the highest value of 7.64% whereas Verizon and AT&T lost slightly during the same time period. Similarly, over the last six months, the price performance of key telecom stocks was mostly positive. DISH and China Mobile witnessed considerable rally in stock prices of 30.70% and 29.16%, respectively while Sprint collapsed a massive 45.07% and T-Mobile US lost 14.80% of value over the same time frame.

What’s next in the Telecom Sector?

The AWS-3 spectrum auction conducted by the FCC will continue in the coming week as well. Apart from this, we do not foresee any significant event in the telecom industry in the near future. Therefore, we expect stocks to trade in line with the broader market movement.

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