The Zacks Analyst Blog Highlights: Vodafone Group Plc, Tata Communications, Verizon Communications, AT&T and Sinopec

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Mar 13, 2012, 09:30 ET

CHICAGO, March 13, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Vodafone Group Plc (Nasdaq: VOD), Tata Communications Ltd (NYSE: TCL), Verizon Communications (NYSE: VZ), AT&T Inc. (NYSE: T) and Sinopec (NYSE: SNP).

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Here are highlights from Monday's Analyst Blog:

VOD, Cable & Wireless Deal Extended

British mobile phone giant Vodafone Group Plc (Nasdaq: VOD) has granted an extension until March 29 to make a potential bid for the acquisition of Cable & Wireless Worldwide Plc.

The same deadline was given to Tata Communications Ltd (NYSE: TCL), which also showed interest in acquiring Cable & Wireless early this month. Tata Communications has hired Standard Chartered plc as its financial adviser for evaluating the benefits of the offer.

Last month, Vodafone disclosed its intention to acquire Cable & Wireless for £700 million ($1.1 billion). If the deal is proposed, it will likely be in cash according to the Times of London. The company will have to drop the bid, should it fail the deadline, under British takeover rules.

Over the next few years, mobile data expansion will be the key growth driver for both Vodafone and the industry at large. The company is accelerating its investments in faster networks to boost smartphone sales and increase data traffic.

Vodafone is way ahead of its competitors in upgrading the 3G and HSPA+ networks. The launch of 4G Long Term Evolution services in Germany in 2010 was a huge success. Vodafone plans to launch the LTE network in Spain and Italy over the short term. We believe the ongoing efforts to upgrade the existing network infrastructure should result in higher average revenue per user, higher minutes of use and improved operating margins through greater network efficiency.

The prospect of mobile data is better in emerging markets with an expected mobile penetration rate of 70% compared with 130% in mature markets.Given the rising demand for Internet on cell phones, the potential Cable & Wireless deal would provide more data access to smartphones customers.

Coupled with successful smartphone and data services, Vodafone is looking for further expansion in the emerging markets of Eastern Europe, India and Africa through new growth strategies and by exiting minority holdings to boost liquidity, free cash flow and shareholders' return.

However, persistent revenue declines in southern European operations, regulatory pressure, stiff competition from larger rivals like Verizon Communications (NYSE: VZ) and AT&T Inc. (NYSE: T), and reductions in mobile termination rates pose major threats to the stock.

We are currently maintaining our long-term Neutral recommendation on Vodafone. For the short term (1–3 months), the stock retains a Zacks #3 (Hold) Rank.

Sinopec Strikes Gas at Yuanba 9

China's state-owned energy company, China Petroleum & Chemical Corp. or Sinopec (NYSE: SNP) has come across massive gas reserves during the drilling of exploration wells in the Yuanba field, in Sichuan province.

Following large scale fracturing, Sinopec struck shale gas with an estimated daily flow of 11,500 cubic meters at a depth of 4,035-4,110 meters in the gas-rich Sichuan basin. The gas was found in the Yuanba-9 well in the northeastern part of the basin, while the Yuanba 21 well has a production capacity of 507,000 cubic meters of gas a day.

Per China's Ministry of Land and Resources, the country holds a projected 25.08 trillion cubic meters of potentially recoverable shale gas reserves. Till date, China has not initiated any commercial production of the unconventional energy source.

Major energy players all over the world are working on the usage of new technologies to extract the unattainable shale gas in China and hoping to evidence a rapid increase in gas output.

Yuanba is a major producer of conventional natural gas in the Sichuan basin in Sinopec's portfolio. Following the commissioning of the neighboring Puguang field in 2010, development focus has shifted to Yuanba. Per estimates, production capacity at Yuanba is expected to reach 3.4 billion cubic meters annually by the end of the ongoing five-year economic plan in 2015.

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