Nov. 24, 2014, 10:26 AM
- Citing higher spectrum and network investment costs, and the revenue impact of tougher price competition, Citi's Michael Rolling has downgraded Verizon (VZ -1.9%) to Neutral. AT&T (T -1.9%) is following Verizon lower.
- Rollins: "We believe the wireless industry is experiencing a great disconnect between the growth in data traffic and the growth in revenue ... We continue to fear that recent promotions create risk that the wireless industry at large may not be able to capture substantial incremental revenue from the rise in data consumption over time."
- Verizon has largely maintained its premium pricing in the face of major price cuts from T-Mobile and Sprint, but the carrier has been offering more data promos as of late. AT&T has been more willing to return fire, and has seen its wireless service growth revenue evaporate along the way.
- Last Friday: FCC auction bids hit $33B
Jul. 31, 2014, 1:02 PM
- France's Iliad (OTC:ILIAF) is offering $15B in cash for a 56.6% stake in T-Mobile USA (TMUS +7.3%) at a price of $33/share. Iliad values the remaining 43.4% at $40.50/share. Sprint (S -5.3%) has been reported to be planning a ~$40/share deal.
- Iliad says it has obtained financing from unnamed banks, and would also do a capital raise to help pay for the deal. One issue: Iliad has a current market cap of just $16B, less than T-Mobile's $24.8B and Sprint's $30.6B. Sprint has reportedly lined up a $40B+ debt package to finance a T-Mobile deal.
- A source tells the WSJ Iliad, which has upended the French mobile market with its aggressive pricing, views a T-Mobile merger as a "one-time opportunity to enter the world's-largest telecoms market."
- Iliad also thinks (perhaps with good reason, given FCC/DOJ remarks) regulators will be more comfortable with its bid than Sprint's, since Iliad has no U.S. presence.
- AT&T (T -2%) and Verizon (VZ -2.3%) have joined Sprint in selling off, as investors mull the possibility of a deal that would leave the number of nationwide U.S. carriers at 4. Concerns about Iliad's pricing history might also be weighing on shares.
- Related tickers: OTCPK:SFTBF, OTCQX:DTEGY
- Earlier: Iliad reportedly bids for T-Mobile USA
Jul. 29, 2014, 12:14 PM
- "I’m skeptical it can be replicated," says Elevation LLC's Stephen Sweeney about Windstream's (WIN +12.9%) REIT spinoff plans. "It’s very unclear if other large cap companies can have their companies viewed by the IRS as real estate."
- UBS also has its doubts: It thinks AT&T (T +3.3%) and Verizon (VZ +1.8%) would have to open up their networks to rivals if they were spun off into REITs, something it doesn't think the carriers will be keen on doing.
- Oppenheimer's Tim Horan is more positive, albeit while cautioning Windstream's spinoff isn't a done deal. "If successful with this restructuring, and there are obviously high regulatory barriers, this will be a game changer for the valuation of non-REIT infrastructure stocks in our industry.”
- AT&T, Verizon, Windstream, Frontier (FTR +11.7%), and CenturyLink (CTL +4.2%) have pared their morning gains a bit amid volatile trading on very heavy volumes. AT&T has seen 66M shares trade vs. a daily average of 19.3M; Frontier has seen 89M trade vs. an average of 6.9M.
- Enthusiasm about Windstream's spinoff stems not only from the tax benefits provided to REITs - American Tower's tax expense has been halved since it converted into a REIT in 2012 - but also from the potential for spinoffs to spark new M&A activity.
- Windstream CFO Tony Thomas: "The REIT is going to be uniquely positioned to be in a great spot to help unlock value at other companies ... We have a good understanding of how the REIT opportunity could work in the telecom landscape."
- Earlier: Telcos soar following Windstream's REIT announcement
Jul. 29, 2014, 10:14 AM
- Windstream's (WIN +22.3%) plans to spin off some of its telecom network assets into a REIT (following a favorable IRS ruling) has lit a fire under U.S. telecom carriers, as investors bet more REIT announcements will happen. Some might also be hoping REIT spinoffs spark additional M&A activity in an industry that has seen plenty of it.
- Frontier (FTR +15.8%) and CenturyLink (CTL +8.1%) are also off to the races, and AT&T (T +3.9%), Verizon (VZ +1.9%), and Sprint (S +2%) aren't doing badly either.
- Other gainers include Alaska Communications (ALSK +5.2%), TDS (TDS +4.1%), and Lumos Networks (LMOS +5.5%), as well as Level 3 (LVLT +5.9%) and merger partner TW Telecom (TWTC +5.2%). Level 3 posted a Q2 beat this morning.
- Windstream's spinoff will feature its fiber/copper networks and other real estate. The company expects to retire $3.2B in debt following the spinoff (expected to close in Q1 2015), and to have the REIT raise $3.5B in debt.
- Windstream plans to have an aggregate annual dividend of $0.70/share following the spinoff ($0.60 for the REIT, $0.10 for Windstream proper). That's down from a current $1.00/share.
Jun. 20, 2014, 12:16 PM
- The NY Post reports Verizon (VZ -0.3%) is eying Dish's (DISH +3.3%) high-frequency spectrum, estimated by analysts to be worth as much as $17B. One source states early, informal talks have been held.
- Dish has been looking for a partner for its spectrum, which is particularly useful for handling 4G traffic in high-density urban areas. After Dish's Sprint bid was thwarted last year, Charlie Ergen has said he's open to a T-Mobile deal. But Sprint and T-Mobile are now eying a merger of their own (regulators permitting).
- Verizon has been dealing with a 4G capacity crunch in many big metro areas; the carrier is responding by rolling out 4G in the high-frequency AWS band. Buying Dish's spectrum would give Verizon more long-term headroom.
- Regulators probably wouldn't object to a deal, given Sprint and T-Mobile each have considerable high-frequency spectrum. But with Verizon having $110B in debt following the Vodafone deal, balance sheet concerns could get in the way.
- The AT&T/DirecTV deal fueled speculation Verizon will make a bid to fully acquire Dish. But Verizon CEO Lowell McAdam quickly shot down the idea.
May. 15, 2014, 1:56 PM
- The FCC has voted 3-2 to restrict how much spectrum AT&T (T +0.2%) and Verizon (VZ -0.2%) can buy in next year's huge low-frequency spectrum auctions.
- Sprint (S +3.4%) and T-Mobile (TMUS +1.9%) have both lobbied aggressively for restrictions to be placed on AT&T/Verizon, who between them have a huge share of low-frequency mobile spectrum (better for rural/in-building coverage).
- The decision shortly follows a similar vote in favor of chairman Tom Wheeler's net neutrality proposal - it doesn't prohibit pay-for-priority deals with content providers, but does seek comment on whether they should be banned, as well as on whether other neutrality regulations should be imposed.
- The FCC is also set to vote on a spectrum cap rule change for vetting mergers/acquisitions. Sprint and T-Mobile are hoping that one doesn't pass.
May. 1, 2014, 8:01 AM
- Thanks to aggressive pricing and a slew of promotions, T-Mobile (TMUS) added 1.3M branded postpaid subs (1.2M phone subs), 465K branded prepaid subs, and 600K non-branded subs in Q1. The branded postpaid figure dwarfs Verizon's (VZ) 539K and AT&T's (T) 625K - the difference in phone adds is even larger - and compares with a net loss of 333K for would-be suitor Sprint (S).
- Regulators mulling a Sprint/T-Mobile tie-up are doubtlessly paying attention, and the same goes for AT&T and Verizon: The former has responded more aggressively to T-Mobile's price cuts thus far than the latter.
- Thanks to the strong Q1 numbers, which come after T-Mobile added 1.645M total subs (869K branded postpaid) in Q4, the carrier now expects 2.8M-3.3M branded postpaid net adds in 2014, up from a prior 2M-3M. Cash capex is still expected to be in a range of $4.3B-$4.6B.
- At the same time, T-Mobile's strategy continues taking a near-term toll on its bottom line: Adjusted EBITDA fell 26% Y/Y to $1.09B, and T-Mobile has cut its full-year adjusted EBITDA guidance to $5.6B-$5.8B from $5.7B-$6B. Adjusted EBITDA margin fell 400 bps Q/Q to 20%.
- Service revenue rose 4.5% Y/Y to $5.34B. Branded postpaid churn fell 20 bps Q/Q and 40 bps Y/Y to 1.5% (a new record). ARPU fell $0.69 Q/Q to $50.01. "Simple free cash flow" (adjusted EBITDA - cash capex) was $141M, down from $357M in Q4 and $239M a year ago.
- TMUS +7.6% thanks to the sub adds and a Bloomberg report stating Sprint has lined up financing for a bid. Sprint +6.2%. T-Mobile parent Deutsche Telekom (DTEGY) is up 2.9% in Frankfurt.
Apr. 24, 2014, 10:10 AM
- Verizon (VZ -2%) had only 539K wireless postpaid net adds in Q1 (549K total), down from 677K a year ago (720K total) and for once below AT&T's quarterly postpaid figure of 625K. Also, retail churn rose 7 bps Y/Y to 1.37%, and retail postpaid churn 6 bps to 1.07%.
- Those figures raise the question of whether Verizon's commitment to a premium pricing strategy in the face of a T-Mobile-launched price war is impacting subscriber adds.
- Nonetheless, wireless service revenue grew 7.5% Y/Y, nearly even with Q4's 8% and much better than AT&T's 2.2%. Wireless op. margin rose 210 bps to 35%, and retail postpaid ARPA 6.3% to $159.67. Verizon ended Q1 with 103.3M retail connections (97.3M postpaid).
- Wireline revenue fell 0.4%, as 4.4% and 6.4% declines in enterprise and wholesale revenue (caused in part by voice weakness) offset a 6.2% increase in consumer retail (driven by 15.5% FiOS growth). Wireline op. margin rose 10 bps to 1.5%.
- 98K and 57K FiOS Internet and TV subs were respectively added, down from 126K and 96K in Q4. Total broadband connections (FiOS or otherwise) rose 1.5% to 9M.
- Q1 free cash flow was $3.93B, below net income of $5.99B but above illustrative net income of $3.8B. Verizon is still expecting 4% 2014 revenue and EBITDA growth. Its dividend yield stands at 4.6%.
- Sprint (S -3.2%) and T-Mobile (TMUS -2%) are following Verizon lower. They fell yesterday in the wake of AT&T's report. Sprint reports on April 29
- Q1 results, PR,
Feb. 27, 2014, 1:19 PM
- Morgan Stanley has resumed coverage on Verizon (VZ +2.8%) with an Overweight and $52 PT, and JPMorgan has added the carrier to its Focus List two days after resuming coverage with an Overweight and $57 PT.
- MS' Simon Flannery calls Verizon's valuation "attractive," and likes its mobile competitive positioning. He suggests shares have been pressured by the impact of Vodafone's 1.27B-share distribution following the closing of the Verizon Wireless deal.
Feb. 24, 2014, 6:41 PM
- Verizon (VZ) and AT&T (T) have confirmed that they, too, are talking with Netflix (NFLX +3.4%) about direct peering deals. Verizon CEO Lowell McAdam says his company's talks with the streaming giant have been going on for about a year.
- Netflix shares closed the day with strong gains, as analysts argued direct peering deals such as the one just reached with Comcast could end up having a neutral or even positive impact on Netflix's bandwidth costs, given the company will no longer have to pay intermediaries such as Cogent (CCOI -6.8%).
- Dan Rayburn: "It should actually be cheaper for Netflix to buy direct from Comcast, and they also get an SLA, which also improves quality ... While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit."
- Others aren't convinced direct peering deals are a positive. The Washington Post: "Cogent has many competitors. Verizon's FiOS service does not. If companies like Cogent are squeezed out of business, it will make these already powerful network owners even more powerful."
- GigaOm: "These agreements aren’t transparent ... rates could go up over time, and they essentially act as a tax on the Internet."
Feb. 3, 2014, 12:02 PM
- Following a Q4 in which it saw disappointing net subscriber adds and intensifying competition from T-Mobile (TMUS -1%), AT&T (T -3.4%) has launched aggressively-priced plans for families looking to share 10GB/month of data between accounts while receiving unlimited talk/text.
- A family with just two smartphones still has to pay $130/month, but each additional smartphone costs only $15/month. One important catch: Like AT&T's recent shared data plan discount and a $200 credit provided in its T-Mobile promotion, the family plans require users forgo traditional smartphone subsidies. AT&T's efforts to pare subsidy expenses are a major reason its wireless op. margin rose 690 bps Y/Y in Q4.
- AT&T is underperforming on a bad day for equities, as are Verizon (VZ -3.4%) and Sprint (S -4.3%). While AT&T, Sprint, and (especially) T-Mobile have launched major discounts and promotions in recent months, Verizon has maintained its premium pricing strategy, betting its coverage and service quality will allow it to continue delivering industry-leading subscriber adds and margins. But fears are growing Big Red increasingly has no choice but to return fire.
- AT&T's latest move comes days after the carrier announced a $100 credit for each new line opened by a new or existing subscriber.
Jan. 22, 2014, 10:04 AM
- Intel (INTC -1.6%) has been cut to Hold by Drexel Hamilton following last week's Q4 numbers. Drexel had only upgraded shares on Dec. 6.
- Verizon (VZ -0.7%) has been cut to Sector Perform by Pac Crest following yesterday's Q4 results (I, II).
- Red Hat (RHT +0.7%) has been upgraded to Outperform by Oppenheimer. Morgan Stanley upgraded shares last week.
- Qlik (QLIK +0.4%) has been upgraded to Hold by Drexel Hamilton. Q4 results are due on Feb. 20.
- Silicon Motion (SIMO +5.3%) has been upgraded to Buy by Needham ahead of its Jan. 28 Q4 report.
- Callidus Software (CALD +3.1%) has been started at Outperform by Credit Suisse. Q4 results arrive on Feb. 5.
- Electronics for Imaging (EFII +4.3%) has been started at Overweight by Barclays ahead of its Jan. 28 Q4 report.
Jan. 9, 2014, 2:42 PM
- AT&T (T -1.9%), Verizon (VZ -2%), and Sprint (S -4.4%) are each selling off after T-Mobile USA (TMUS -1.1%) announced a credit program for defecting mobile subscribers - up to $300 in credit for trading in a phone, buying an approved T-Mobile phone, and signing up for a postpaid plan, and up to $350 to pay off termination fees - that was even more aggressive than expected. Sprint is also being pressured by a Deutsche downgrade to Hold.
- FBR's David Nixon likely speaks for many on the Street when he expresses concerns AT&T, Verizon, and Sprint "will be forced to react to the move." Fears that T-Mobile's efforts will pressure industry margins and increase churn have already been running high. AT&T announced a smaller promotion (up to $450 in credit) last week.
- Nixon also says CES feedback points to "surprising confidence from T-Mobile US that a merger with Sprint could be approved if argued on the right basis." T-Mobile CEO John Legere didn't rule out a future acquisition by Sprint yesterday, though he did suggest T-Mobile's brand would be maintained post-acquisition. Legere also took quite a few shots at his rivals.
- Meanwhile SoftBank (SFTBF, SFTBY) CEO Masayoshi Son isn't mincing words regarding Sprint's challenges. In a Nikkei column, Son blasts Sprint's marketing efforts (all of the company's ad agencies have been fired), and says the carrier "has gotten used to being a loser."
Oct. 18, 2013, 9:34 AM
- AMD (AMD -12.7%) has been cut to Neutral by BofA/Merrill after beating Q3 estimates and providing above-consensus Q4 revenue guidance, but also reporting a 15% Y/Y drop in CPU division sales due to PC weakness.
- Verizon (VZ +0.8%) has been upgraded to Buy by Stifel a day after beating Q3 estimates and reporting better-than-expected mobile subscriber adds.
- Amazon (AMZN +2.4%) has been upgraded to Buy by UBS ahead of its Oct. 24 Q3 report.
- VMware (VMW +2.8%) has been upgraded to Overweight by JPMorgan ahead of Monday's Q3 report.
- T-Mobile USA (TMUS +2.7%) has been added to Goldman's Conviction Buy list ahead of its Nov. 5 Q3 report.
- Intuit (INTU +2.6%) has been upgraded to Buy by BofA/Merrill.
- Align Technology (ALGN +24.4%) has been upgraded to Buy by Cantor following its Q3 beat.
- LG Display (LPL -0.2%) has been cut to Hold by Craig-Hallum after issuing a Q4 warning.
- Ultratech (UTEK -10.2%) has been cut to Hold by Canaccord following its Q3 miss.
- Sierra Wireless (SWIR -1%) has been cut to Market Perform by Raymond James; Q3 results arrive on Nov. 7.
- Aspen Technology (AZPN -0.9%) has been cut to Neutral by JPMorgan.
- Analog chipmakers International Rectifier (IRF -1.7%) and Monolithic Power (MPWR -1.3%) have been cut to Market Perform by Wells Fargo.
- U.S. Cellular (USM -1.2%) has been started at Underperform by FBR.
Oct. 17, 2013, 9:38 AM
- Verizon (VZ +2.4%) added 1.1M net retail wireless connections in Q3, and saw 927K retail postpaid net adds. Those figures compare with 1M and 941K in Q2, and are evidence Big Red continues to take U.S. mobile share. Total retail postpaid connections +5% Y/Y to 95.2M, total retail connections +5% to 101.2M; both figures grew at a 6% clip in Q2.
- Verizon's wireless service revenue rose 8.4% Y/Y in Q3, even with Q2 and outpacing sub growth. Wireless op. margin was 33.8%, +140 bps Q/Q and +200 bps Y/Y. 67% of retail postpaid subs now use smarphones (up from 64% in Q2), and 42% use a shared data plan.
- Retail postpaid ARPA +2% Q/Q and +7% Y/Y to $155.74. But retail postpaid churn was 0.97%, up from 0.91% a year ago.
- FiOS Internet and TV net adds totaled 173K and 135K, respectively. That compares with 161K and 140K in Q2. FiOS Internet and TV subs totd 5.9M and 5.2M at quarter's end. Total broadband connections rose by 56K Q/Q to 9M. Consumer wireline ARPU rose 8.7% Y/Y to $112.86.
- However, wireline revenue fell 1% Y/Y, as declines in small business, "Core" enterprise, and global wholesale services offset gains for consumer retail and "strategic" enterprise. 371K wireline voice connections were lost, total voice connections -6% Y/Y to 21.5M. Wireline op. margin was 1.6%, up from 0.8% in Q2 and 0.4% a year ago.
- Q3 results, PR
Sep. 23, 2013, 12:28 PM
- SocGen's Andy Perkins isn't impressed Apple's (AAPL +3.5%) new FQ4 revenue guidance remains within its original range in spite of the company's strong weekend iPhone sales. He takes this as a sign higher 5S/5C sales "came at the expense of the 4S." His $500 PT remains unchanged.
- Others on the sell-side are more enthusiastic, taking the numbers as evidence 5C demand was better than feared. Gene Munster thinks the 5C may have accounted for 3M-4M of the 9M+ weekend sales.
- Mobile analytics firm Localytics offers a different take. The firm's tracking data indicates the 5S outsold the 5C by a 3.4:1 margin in the U.S. over the weekend, and by a 3.7:1 margin internationally. In Japan, where NTT DoCoMo has commenced iPhone sales and the 5S is being offered for free with 2-year contracts, the ratio was 5:1.
- The 5S/5C managed to account for 1.36% of all active U.S. iPhones tracked by Localytics as of 8PM ET yesterday. 49% of them were on AT&T's (T -0.7%) network, and 38% on Verizon's (VZ).
VZ vs. ETF Alternatives
Verizon Communications Inc. is a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its two segments are Wireless and Wireline.
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