39% Annualized Return And AT&T
Chris DeMuth Jr. • 175 Comments
Chris DeMuth Jr. • 175 Comments
Going Long Leap Wireless: More Than A Leap Of Faith
Helix Investment Research
Helix Investment Research
Oct. 16, 2015, 10:33 AM
- A review of U.S. wireless operators has Nomura making AT&T (T +0.9%) and T-Mobile (TMUS +2.1%) its top picks, with a more subdued outlook on Verizon (VZ, flat) and Sprint (S -1.1%).
- The firm has Buy ratings on T and TMUS, and is Neutral on VZ and S.
- The companies' reactions to a modest growth future vary widely, says Jeffrey Kvaal. Verizon and AT&T are taking two radically different paths into video, while Sprint and T-Mobile go after share gain -- helped by the fact that the incumbents are unlikely to lower their prices.
- DirecTV synergies should more than offset some share loss at AT&T, and the firm faces modest video subscriber erosion, he says. Meanwhile, T-Mobile should be able to maintain share gains and EBITDA expansion with its aggressive approach.
- As for Verizon, "visibility beyond a sideways 2016 is limited," and Sprint continues to face a balance sheet strain though its improving network and pricing models have put it "on the brink of a true revival story."
- Price targets: For AT&T, $39 (closed yesterday at $33.49, 16.5% implied upside); for T-Mobile, $48 (closed yesterday at $39.94, 20% implied upside); for Verizon, $47 (closed yesterday at $44.67, 5% implied upside); for Sprint, $4 (closed yesterday at $4.27).
Oct. 14, 2015, 8:05 PM
- While Dish Network has taken a firm stance against the merger of Charter (CHTR -2.2%) and Time Warner Cable (TWC -0.9%), AT&T (NYSE:T) tells the FCC it's not opposed, but does want "careful scrutiny" on the subject of online video.
- The agency needs to "review the transaction carefully and consider the impact of cable consolidation and coordination on emerging competition," AT&T said in its letter.
- Dish Network yesterday filed a petition to deny the merger on public interest grounds.
- Charter's approach to TWC may be different than a failed attempt by Comcast, but "the Commission must ensure that the cable industry cannot use coordination to replicate the same mega-cable threat to competition." It pointed to John Malone, Charter's biggest shareholder, who has active interests in media and content firms.
- Previously: Dish Network files FCC petition to deny Charter-TWC merger (Oct. 13 2015)
- Previously: FCC review of Charter-TWC deal turns to broadband effects (Oct. 13 2015)
- Previously: NAB calls to suspend Charter-TWC deal review until broadcast rule reform (Oct. 12 2015)
Oct. 14, 2015, 3:04 PM
- T-Mobile (TMUS -1.6%) has brought back its 10 GB four-line family plan in what may be a harbinger of the wireless war heating up for the holidays.
- The plan -- $120/month for four lines, 10 GB of data -- is reminiscent of more aggressive plans ended this summer, from Verizon ($80 for 10 GB) and T-Mobile ($100 for 10 GB).
- Quieter AT&T (T -0.2%), meanwhile, "seems to be taking a more passive strategy, with a distinct focus on subscriber retention, ARPU (average revenue per user) preservation and setting the stage for growth and cross leverage opportunities as it integrates the DirecTV asset," says Barclays' Amir Rozwadowski.
- Including tablets, Rozwadowski is forecasting that Verizon (VZ -0.7%) will add 1.15M postpaid subscribers this quarter, followed by T-Mobile (1.07M), AT&T (300K) and Sprint (S -2.9%) with 270K.
- Verizon is first up among quarterly reporters next Tuesday.
Oct. 8, 2015, 3:13 PM
- AT&T (T +0.7%) and T-Mobile (TMUS -1.9%) have agreed to swap PCS and AWS-1 spectrum licenses around the U.S., according to FCC filings -- a move that should bring more service efficiency.
- The deal is pending FCC approval. Some major markets involved include Phoenix, Minneapolis, Boston, and Austin-San Antonio.
- The blocks are being swapped in identical amounts, so each carrier's total holdings will be unchanged -- but the ability to work in bigger contiguous blocks means greater efficiency for both, including a coveted 15+15 and 20+20 Wideband LTE offering that T-Mobile had hoped to provide.
Sep. 30, 2015, 5:15 PM
- Sprint (S +2.7%) is going to kick up the cost of its unlimited data plan, formerly $60/month, to $70/month, showing that unlimited data plans may be testing sustainability at the wireless carriers.
- That's still the best U.S. postpaid deal for that plan, and current customers will be grandfathered in at the $60/month rate. The price changes for new customers Oct. 16.
- T-Mobile (TMUS +0.6%) sells an unlimited data plan for $80/month, and AT&T (T +1.5%) and Verizon (VZ -0.1%) don't offer one.
- Sprint CEO Marcelo Claure has alluded to the strain of unlimited data, as well as wishes to bump customers toward the tiered data plans.
- Earlier, Sprint pursued limiting video download speeds, but has removed such restrictions as customers pushed back.
Sep. 22, 2015, 12:46 PM
- Traffic checks of U.S. wireless carriers by Pacific Crest's Michael Bowen show slowness for the leaders and some momentum for challengers.
- Verizon (VZ -1%) was "slow" and AT&T (T -0.9%) "somewhat weak" in the past month heading into a key iPhone announcement. Verizon saw a lower amount of pre-orders for the iPhone and was coming off a data plan re-sizing; AT&T is lower-key about pushing phone upgrades, though tablet promotions are going well and customers are responding to DirecTV bundles.
- Meanwhile, promotions are bearing fruit at T-Mobile (TMUS -1.9%) and Sprint (S -1%). T-Mobile traffic was "strong," Bowen says, with employees optimistic about iPhone pre-orders and new financing plans. Meanwhile, most Sprint stores met or beat August goals and expect the same for September, as the "iPhone forever" leasing plan is showing strong demand.
Sep. 15, 2015, 4:49 PM
- AT&T (T +0.9%) and Verizon (VZ +1.6%) have both said they're amping up their footprint in Best Buy stores, meaning more products and more service.
- Verizon's begun its expansion already, and plans to have 100 locations done by month's end. The areas are "geared to showcase connected lifestyles – such as wearable tech, computing on the go and connected home – and the devices and plans that make these lifestyles a reality," said Verizon's John Colaiuti.
- Both companies plan to have expanded their new approaches to all 250 stores by the end of 2015.
- Meanwhile, in a review of U.S. wireless firms, Morgan Stanley has reiterated its Overweight rating on Verizon, and an Equal Weight rating on AT&T.
Sep. 2, 2015, 11:39 AM
- Needing a good network to pursue further growth in Mexico, but "light-years away from it," Telefonica (TEF -2.2%) says it's open to deals with competitors there, including America Movil (AMX -0.1%) and AT&T (T +0.6%).
- Technical improvements could hinge on a possible deal with America Movil's tower spinoff Telesites, if it makes its infrastructure available. Combined creation of infrastructure is also a possibility.
- AT&T has been working on its deal to rent towers from Telesites, which holds 11,000 towers in the country.
- Telefonica has an "obligation" to explore possible deals, said COO Jose Maria Alvarez-Pallete. “We still have a lot of work to do in Mexico, but for the first time we have elements” for growth.
- Previously: Telefonica: Brazil recession 'won't change our plans' (Aug. 31 2015)
Sep. 2, 2015, 7:58 AM
- The 11% decline from a late June high provides a near-term value opportunity, say Goldman Sachs, upgrading AT&T (NYSE:T) to Buy.
- The current price doesn't reflect improved dividend coverage with upside potential from DTV merger-related synergies, breathing room in wireless after Verizon backed off some of its aggressive promotions, and too-low consensus EPS estimates for 2016 (h/t Dominic Chu).
- Shares +1.5% premarket
Sep. 1, 2015, 4:52 PM
- AT&T (T -2.6%) files an 8-K saying it's learned of a "mini-tender" offer by TRC Capital Corp., to purchase up to 3M outstanding shares for $31.30/share.
- The company recommends rejection of the unsolicited offer, which is set to expire on Sept. 25. The offer price is below AT&T's current closing price of $32.33.
- AT&T warns that TRC Capital has approached other companies' shareholders with similar "mini-tenders" -- which avoid many SEC requirements by seeking less than 5% of outstanding shares.
Aug. 27, 2015, 3:11 PM
- Sprint (NYSE:S) is giving up some of today's gains, now +3.3%, after news of its latest promotion: "Celebrating" the merger of AT&T (NYSE:T) and DirecTV (NASDAQ:DTV) by offering a year of free phone service to DTV customers who switch.
- The deal will be offered starting tomorrow through September's end. DirecTV customers who switch to Sprint -- or some existing customers adding lines or phones -- will get 12 months unlimited talk/text and 2 GB of data per line, up to five lines.
- The existing customers would need to add a new line through Sprint Lease, iPhone Forever, Sprint Easy Pay or pay full retail price for a new smartphone.
- Customers would be migrated to the comparable paid plan after the year was up.
- Updated: "This ranks right up there with a desperate Hail Mary pass to a petite defensive lineman," said an AT&T spokesperson (in a Super Bowl allusion?). "With Sprint's network and the many asterisks on this deal, we're feeling good about our offers."
Aug. 25, 2015, 12:49 PM
- AT&T (T +0.9%) is beginning the long process of rebranding services from the two Mexican wireless firms it bought.
- The company's Mexico CEO Thaddeus Arroyo says the refiguring -- of brands previously belonging to Grupo Iusacell and Nextel Mexico -- will begin by the end of this year and take all of 2016 to complete.
- The moves are part of AT&T's longer-term strategy to end up with a North American service area -- which has rivals moving to offer their own "borderless" promotions and plans.
- AT&T's moves into Mexico were spurred by the country's government, which acted to favor challenges to dominant America Movil (AMX +2.7%), and Arroyo stuck up for the regulations that the lead carrier was facing: “Things haven’t changed a lot. We are here to change it. We have less than 9% of the market, 68% of the market is still totally in one company. So the asymmetric rules are necessary.”
Aug. 24, 2015, 4:01 PM
- Cricket Wireless (T -2.9%) has the latest move in international roaming one-upsmanship, offering calling from the U.S. to nine new countries in the Americas.
- Primary usage of the phone must be in the U.S., but customers can add $10-$15/month to add minutes to the country of their choice among the Dominican Republic, Colombia, Costa Rica, El Salvador, Honduras, Guatemala, Jamaica, Haiti, or Nicaragua.
- The move follows Cricket's earlier step offering unlimited talk and text between the U.S., Mexico and Canada.
Aug. 24, 2015, 11:38 AM
- BT Group's (BT -4%) Americas president has charged Verizon (NYSE:VZ) and AT&T (NYSE:T) with hurting competitors by abusing landline monopolies, and called for tough regulations to force access to the networks.
- The UK telecom serves hundreds of customers in the U.S. but pays to reach the "special access network" -- the portion that goes the last mile into homes and offices -- of which Verizon and AT&T control about 80%.
- The FCC requested data from telecoms on the special access networks last year. BT's Bas Burger points to research suggesting the top two U.S. telecoms are overcharging for that access by about $9B/year.
- Burger is calling for regulated prices there. “For a western world country it is the worst I’ve seen."
- “There is not sufficient regulation to create competition," he says; "almost all access is being provided by two companies and they have divided the country among themselves.”
Aug. 17, 2015, 4:53 PM
- Another brick falls from the contract-wireless wall, as Sprint (S +10.1%) CEO Marcelo Claure tells The Wall Street Journal that the carrier will do away with contracts and shift to a leased-smartphone model by year's end.
- Sprint introduced a lease option last year, and ending its subsidies means that leasing or upfront purchase will be the only ways to get a smartphone from the carrier.
- The move leaves AT&T (T +0.5%) as the only carrier of the U.S. big four that is still offering to subsidize a smartphone buy. Verizon (VZ +0.1%) made its major move earlier this month, and all are following in T-Mobile's (TMUS +1.9%) footsteps on dropping contracts.
- Earlier, Sprint rolled out its "iPhone Forever" plan that served as a precursor to the model: For $22/month over and above the usual monthly fees, customers can upgrade to the latest iPhone as soon as it becomes available, rather than once every two years. Claure says parent SoftBank (OTCPK:SFTBY -1%) will help it monetize traded-in phones.
Aug. 12, 2015, 9:25 AM
- AT&T (NYSE:T) is off 2.2% premarket as it kicks off an analyst day with three-year projections for the new-look company after its combination with DirecTV (NASDAQ:DTV).
- The company sees EPS this year of $2.62-$2.68, vs. a consensus of $2.60, on revenues growing in the double-digit range due to the acquisition, and free cash flow of $13B range or better.
- For 2016-2018, the company is guiding to revenue growth in line with GDP growth or better, EPS growth in the mid single digits, and a free cash flow dividend payout ratio in the 70s.
- "We're a different company than when we began the year and it shows in what well be able to offer customers and in our financial outlook," says CEO Randall Stephenson. "We've diversified our capabilities, added significant scale in video and mobility, and can now deliver integrated services that set us apart from the competition."
- Sticking with its most recent optimism on synergies, the company says it can see run-rate cost synergies at $2.5B or more each year through 2018. Capex this year is expected in the $21B range.
- Webcast of AT&T Analyst Conference 2015 starts at 10 a.m. ET.
- Previously: AT&T call: Seeing $2.5B synergies as DirecTV deal nears OK (Jul. 23 2015)
AT&T, Inc. provides telecommunication services and products, including wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking and wholesale services. It operates business... More
Industry: Telecom Services - Domestic
Country: United States
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