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

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

PR Newswire

CHICAGO, Sept. 25, 2013

CHICAGO, Sept. 25, 2013 /PRNewswire/ --Today, Zacks Equity Research discusses
the U.S. Oil & Gas, including Verizon Communications Inc. (NYSE:VZ-Free
Report), Comcast Corp. (NYSE:CMCSA-Free Report), Time Warner Cable Inc.
(NYSE:TWC-Free Report) and Vodafone Group plc. (Nasdaq:VOD-Free Report)


Industry: Telecom


The telecommunications industry is identified as a major driver of global
economic recovery. Unprecedented growth in high-speed mobile Internet traffic,
in particular for wireless data and video, has transformed the industry into
the most evolving, inventive and keenly contested space. In addition, the
emergence of wireless broadband technology has created several new service
areas, which offer huge growth potential.

Currently, the U.S. Telecommunications Industry is evolving around broad
factors, including wireless gradually becoming the future of the telecom
industry, and consequently spectrum is gaining popularity. High-speed
fiber-based network is projected to expand more aggressively, especially for
video/TV offerings.

In addition, consolidation within the industry will continue, mainly due to
shortage of airwaves and for attaining economies of scale. Innovative products
will be launched in areas of m-Commerce, virtualization and cloud-based
technology, high-speed metro Ethernet, to name a few. Apart from these, there
still remains ample scope for expansion in the U.S. According to the Federal
Communications Commission (FCC), nearly a fifth of rural American households
lack broadband access.

Wireless Is the Key

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.

Currently, the U.S. has approximately 300 million wireless subscribers. Mobile
broadband has become the most lucrative source of revenue for the wireless
operators. Massive growth of data buoyed by mounting smartphone adoption is
the main reason for this favorable scenario. The U.S. currently accounts for
70% of LTE subscribers in the world. Apart from the terrestrial wireless
network, the U.S. has an advanced satellite broadband network, mobile
satellite radio system and extensive WiFi network.

Spectrum Crunch

The lack of public airwaves (spectrum) in the telecommunications industry
creates a high barrier to entry. The U.S. telecom market is controlled by just
four national players, as regional low-cost operators are not eligible to
compete with large carriers.

Furthermore, it is not easy to establish a new telecom carrier since it will
require government approval to transmit voice, data, and video on public
airwaves. Spectrum licenses are limited and therefore quite expensive.
Moreover, the deployment of network infrastructure requires significant
capital expenditure, which very few entities can afford.

The U.S. wireless industry is facing acute spectrum shortage, resulting in
data packet dropping at times. Carriers are concentrating on the effective
utilization of existing spectrums along with acquiring more of it.

Mergers and Acquisitions to Continue

We believe that the U.S. telecom industry will witness more mergers and
acquisitions in 2013. As the scarce and valuable wireless spectrum becomes
utmost necessity, mergers and acquisitions increased exponentially. The strong
established players need more spectrums to gain competitiveness, small players
prefers 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. (NYSE: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 the Verizon Wireless Network
from Vodafone Group plc. (Nasdaq:VOD-Free Report) for about $130 billion.
Verizon currently holds the majority 55% of this venture.

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