Telecom Stock Roundup: T-Mobile US Upgraded By Moody's, Qualcomm Rejects Broadcom Bid

The U.S. telecom industry remained rather subdued last week. Nevertheless, a few developments are worth taking note of.

T-Mobile US Inc.’s (NYSE:S) rating was recently upgraded to Ba2 (in certain metrics) by credit rating agency Moody's Investors Service. Moreover, the company’s rating outlook has been confirmed stable.Moody's upgraded T-Mobile US' corporate family rating (CFR) to Ba2 from Ba3.

The company’s probability of default rating was upgraded to Ba2-PD from Ba3-PD. Its senior secured rating was upgraded to Baa2 from Baa3 and its senior unsecured rating to Ba2 from Ba3. The Speculative Grade Liquidity Rating (SGL-1) was affirmed.

Qualcomm Inc.’s (NASDAQ:QCOM) board of directors rejected the recent $130-billion (includes $25 billion of net debt) takeover offer by Broadcom Ltd. (NASDAQ:AVGO) . The offer was turned down on grounds of inadequacy, as Qualcomm is currently a leading player in the mobile chipset market. Also, Qualcomm is uncertain about getting regulatory support for the proposed deal.

Sprint Corp. (NYSE:S) is reportedly planning to make its unlimited services more attractive by offering free access to online video streaming service provider, Hulu. Basic services of Hulu include TV series, movies, original content and other programming with limited or no commercials. Sprint carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wireless tower operator American Tower Corp. (NYSE:AMT) recently announced the acquisition of tower businesses from Vodafone (LON:VOD) India Limited and Idea Cellular Limited for INR78.5 billion or $1.2 billion. Notably, this leading international wireless tower operator’s majority owned subsidiary in India — ATC Telecom Infrastructure Private Ltd. (ATC TIPL, formerly Viom) — plans to add 20,000 communications sites.

On the earnings front, Windstream Holdings Inc. (NASDAQ:WIN) reported disappointing results in third-quarter 2017. The company’s bottom and top line lagged the Zacks Consensus Estimate. Leading Canadian telecom operator TELUS Corp. (NYSE:TU) reported mixed results in third-quarter 2017, wherein the bottom line lagged the Zacks Consensus Estimate, while the top line beat the same.

Read the last Telecom Stock Roundup for Nov 10, 2017.

Recap of the Week’s Most Important Stories

1. Moody’s credit rating elevation also follows the decision of T-Mobile US and Sprint to call off a potential merger. The merger could have created pressure on T-Mobile US’ credit metrics, on materialization. The company’s innovative network expansion methodologies and improvement plans, stellar network performance, deployment of LTE-U technology and offering of attractive unlimited data are key factors behind the upgraded ratings. (Read more: T-Mobile US Upgraded to Ba2 by Moody's, Outlook Stable)

2. Broadcom’s successful takeover of Qualcomm could have been the biggest tech deal. If the deal were to go through, it would have made Broadcom the world's third-largest semiconductor company, behind Intel (NASDAQ:INTC) and Samsung (KS:005930). However,we believe Broadcom might have to raise the value of the buyout offer to impress Qualcomm’s shareholders. We currently await updates on this front if Broadcom raises its offer or engages in a proxy battle with Qualcomm. (Read more: Qualcomm Rejects Broadcom's $130B Takeover Offer)

3. Sprint’s offering of Hulu is expected to be officially launched on Nov, 17 and will be available to new and existing Sprint unlimited subscribers. As part of the promotion, users will get free access to Hulu's traditional $7.99 per month streaming plan. Each line on a Sprint family plan will be eligible to get its own Hulu account. The offering is anticipated to strengthen Sprint’s position in the already competitive domestic wireless industry. (Read more: Sprint's Unlimited Plan to Offer Free Access to Hulu)

4. American Tower is optimistic about the expansion of mobile broadband services in India, with participation in the Digital India initiative. The company generates more than 50% of the organic core revenue growth from its Indian, EMEA and Latin American markets. American Tower is hopeful that the addition of these two high-quality portfolios will contribute to long-term leasing growth in India. The country’s leading mobile operators are presently focused on accelerating their 4G network deployments. (Read more: American Tower to Acquire Tower Business From Telcos in India)

5. Net income of TELUS on a GAAP basis was approximately $294.89 million, increasing 4.2% year over year. GAAP earnings were 66 cents per share, increasing 1.5% year over year. The third-quarter adjusted earnings of 52 cents missed the Zacks Consensus Estimate by a penny.Total revenues were approximately $2,684 million, up 4% year over year and above the Zacks Consensus Estimate of $2,662 million. (Read more: TELUS Misses Earnings, Beats Revenue Estimates in Q3)

Price Performance

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

In the last five trading sessions, share price movement of the major telecom stocks was predominantly negative. Barring AT&T (NYSE:T), all three U.S. national telecom carriers, Verizon, T-Mobile US and Sprint lost value in the last week. However, leading pay-TV operators like Comcast (NASDAQ:CMCSA) and DISH Network (NASDAQ:DISH) gained substantially in the same time frame.

Meanwhile, price performances of most of the major telecom stocks were negative in the last six months. Sprint, DISH Network, T-Mobile US, AT&T and Telefonica (MC:TEF) lost significantly in the same time period.

What’s Next in the Telecom Space?

We do not foresee any significant changes in the telecom industry or overall global economic factors that can affect the industry in the coming week. Consequently, we expect stocks to trade in line with the broader market movement.

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