Zacks Industry Outlook Highlights: Verizon Communications, Comcast, Time Warner Cable, Vodafone Group and Charter Communications

Jan 22, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 22, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Telecommunications, including Verizon Communications Inc. (NYSE: VZ-Free Report), Comcast Corp. (Nasdaq:CMCSA-Free Report), Time Warner Cable Inc. (NYSE: TWC-Free Report), Vodafone Group plc. (Nasdaq:VOD-Free Report) and Charter Communications Inc. (Nasdaq:CHTR-Free Report).


Industry: Telecommunications


Despite the massive growth in fiber-to-the-home networks, we believe that wireless networks will boost growth in the telecom industry. Moreover, the sector is witnessing a fundamental change. The focus of the operators has shifted from voice calls to data and video. Any new network standard aims at faster data connectivity, quick video streaming with high resolution and rich multimedia applications.

The GSM Association's research wing, GMSA Intelligence, recently revealed its estimation that there will be more than 1 billion LTE connections globally by 2017. Currently, there are approximately 176 million LTE connections worldwide. By 2017, the number is likely to reach around 465 LTE networks across 128 countries.

GSMA Intelligence further reported that LTE users consume an average of 1.5GB data per month, twofold of what is consumed by non-LTE users. In the developing countries, LTE users can generate 20 times higher average revenue per user (ARPU) to carriers than non-LTE users, whereas in the developed countries, ARPU can be 10-40% higher for LTE users instead of non-LTE users. Apart from the terrestrial wireless network, the U.S. has an advanced satellite broadband network, mobile satellite radio systems and extensive WiFi networks.

Mergers and Acquisitions to Continue

We believe that the U.S. telecom industry will witness more mergers and acquisitions in 2014. Owing to the rising popularity and demand for the scarce and valuable wireless spectrum, mergers and acquisitions have increased exponentially. While the strong established players need more spectrums to gain competitiveness, small players prefer to merge with strong rivals rather than trying to establish a nationwide foothold which is extremely capital intensive.   

Verizon Communications Inc. (NYSE: VZ-Free Report) bought spectrums from major cable MSOs including Comcast Corp. (Nasdaq:CMCSA-Free Report),Time Warner Cable Inc. (NYSE: TWC-Free Report) and Bright House Networks. Recently, Verizon announced the largest acquisition proposal of the wireless industry. The company has decided to acquire the remaining 45% stake of Verizon Wireless Network from Vodafone Group plc. (Nasdaq:VOD-Free Report). Verizon currently holds the majority 55% of this venture. Charter Communications Inc. (Nasdaq:CHTR-Free Report) has offerd a bid to acquire Time Warner Cable.

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