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Comcast Could Gain In China With DreamWorks Acquisition

Amid growing regulatory headwinds on the cable TV side of its business, Comcast ( CMCSA ) might again build up its content side by acquiring movie studio DreamWorks Animation ( DWA ). DreamWorks stock surged 17% in afternoon trading on the stock market today on multiple reports that Comcast is in talks to acquire the movie studio. Comcast did not comment on the DreamWorks speculation during its Q1 earnings conference call early Wednesday. Comcast posted Q1 earnings and revenue that topped views, as the cable TV firm added 53,000 video subscribers. Comcast owns NBCUniversal, where filmed entertainment revenue slipped 4.3% in Q1 vs. the year-earlier quarter, after surging 46% in 2015. Comcast is in talks to pay $3 billion or more for DreamWorks, according to reports in the Wall Street Journal and other media outlets. Aside from producing movies, DreamWorks has been creating original content for Web video streamers Netflix ( NFLX ) and Amazon.com ( AMZN ). DreamWorks owns AwesomenessTV, which develops shows for millennials, young adults ages 18 to 34. Verizon Communications ( VZ ) in early April acquired a 24.5% stake in AwesomenessTV for $159 million. One looming question is whether Verizon and its content partner Hearst hold rights to buy the remainder of AwesomenessTV if DreamWorks is sold to a competitor such as Comcast. “We have not made the terms of the agreements public,” a Verizon spokesperson told IBD. DreamWorks’ most popular movie franchises include “Shrek,” “Kung Fu Panda ” and “ How to Train Your Dragon.” There’s optimism, analysts say, for the upcoming “Despicable Me 3” and “The Secret Life of Pets.” DreamWorks has expanded into China, a key market for Comcast.  NBCU’s “Fast and Furious 7” movie last year grossed $400 million at the box office in China. Comcast, DreamWorks Both Building In China With Local Investors Comcast-NBCU is building a $3.3 billion theme park in Beijing with local investors. It’s slated to open in 2019. The Oriental DreamWorks movie studio, meanwhile, is building a new headquarters and entertainment center in Shanghai with local partners. While not commenting on interest in DreamWorks on Comcast’s Q1 earnings call, NBCU Chief Executive Steve Burke said that China “represents a big, big opportunity for the company.” “It already is a significant profit generator,” Burke added. “I think we’re doing all the things that you would expect us to do. (We) have a lot of big movies coming out in China in the next year and want to make sure that we’re doing everything we can to grow that market as aggressively as possible.” Comcast acquired NBCU from General Electric in 2011. For Q1, Comcast said cable TV revenue climbed 6.7% to $12.2 billion, while NBCU revenue rose 3.9% to $6.86 billion. NBCU’s theme park revenue jumped 57% to $1.02 billion. Comcast stock was up a fraction Wednesday afternoon, above 61, and it’s risen nearly 9% in 2016 despite facing regulatory headwinds. Cable TV firms have been squabbling with the Federal Communications Commission over broadband privacy issues as well as the agency’s plans to open up the set-top box market  to more competition. The Department of Justice on Monday cleared  Charter Communications ’ ( CHTR )  purchase of Time Warner Cable ( TWC ), and the FCC moves closer to granting its approval. Charter would be the No. 2 cable TV firm, behind Comcast. Charter will not be allowed to impose usage-based pricing or data caps on broadband customers for seven years as part of proposed conditions on the TWC deal. Whatever conditions Charter agrees to might set the bar for Comcast down the road, analysts say. Regulators thwarted Comcast’s acquisition of TWC in April 2015. Some analysts speculate that Comcast could buy a wireless firm, such as T-Mobile US ( TMUS ), if mobile video competition heats up. Comcast has filed to be a possible bidder in a government auction of radio spectrum owned by local TV stations that began in late March. Comcast said that its Q1 earnings, excluding items, rose 7% from the year-earlier quarter to 87 cents per share, while revenue increased 5.3% to $18.8 billion. Analysts had modeled EPS of 79 cents and revenue of 18.64 billion. Comcast’s video customer additions represent a swing from a loss of 8,000 in Q1 2015. It marked its most video subscriber additions in nine years. Comcast added 438,000 broadband subscribers, up from 407,000 in Q1 2015.

AT&T Postpaid Phone Subscriber Losing Streak Hits Six Quarters

Telecom conglomerate AT&T ( T ) reported Q1 earnings late Tuesday that topped expectations and in-line revenue, as it had a net loss of postpaid phone subscribers — those billed monthly — for the sixth quarter in a row amid fierce wireless competition. AT&T lost 363,000 postpaid phone customers, who are considered more lucrative than prepaid customers who buy minutes as needed. AT&T stock was down 1% in premarket trading Wednesday. T-Mobile US ( TMUS ) on Monday said it added  877,000 postpaid phone lines in Q1, while Verizon Communications ( VZ ) on Thursday reported a loss of 8,000. “AT&T has been a share donor for six consecutive quarters in postpaid handsets, which have by far the highest customer lifetime value,” said Paul de Sa, analyst at Bernstein Research, in a research note. Including tablet users, AT&T added 129,000 postpaid subscribers overall, also below Wall Street estimates. AT&T has focused on selling consumers  product bundles of wireless and DirecTV video services. T-Mobile, meanwhile, has thrived with its Uncarrier-branded promotions, while Sprint ( S ) continues to compete aggressively on price, analysts say. Sprint had been losing postpaid phone subscribers for several years before recently reversing the trend. “Postpaid net adds came in light at 129,000 as AT&T simply refuses to aggressively compete and instead focus on profitability and other areas of the business,” said Colby Synesael, analyst at Cowen & Co., in a report. AT&T said Q1 earnings rose 11% to 72 cents per share, excluding items, topping analysts’ estimate of 69 cents. Including the acquisition of satellite broadcaster DirecTV, AT&T said revenue rose 24% to $40.53 billion, in line with views. AT&T said it lost 382,000 landline  U-verse TV customers while DirecTV gained 328,000, up from 60,000 in the year-earlier period. AT&T had a net loss of 54,000 video subscribers in the March quarter.

T-Mobile Stock Reverses Despite Q1 Hailed As ‘Blowout’

T-Mobile US ( TMUS ) raised 2016 subscriber and cash-flow guidance and reported Q1 revenue that topped views, but shares in the Uncarrier-branded wireless service provider quickly reversed. T-Mobile said it earned 10 cents per share in the March quarter, excluding the after-tax impact of a spectrum sale, in line with consensus estimates. T-Mobile reported a 9-cent per share loss in the year earlier period. Revenue rose 11% to 8.6 billion vs. expectations of $8.4 billion in sales. T-Mobile, controlled by Deutsche Telekom ( DTEGY ), has been gaining subscriber and revenue market share vs. Verizon Communications ( VZ ), AT&T ( T )  and Sprint ( S ) for over two years. T-Mobile’s Binge-on free video plan and other promotions in Q1 were expected to keep its momentum going. T-Mobile fell 4.1% to 39.50 near the market close in the stock market today  after rising 2.5% early to 42.20, a seven-month high and near the the 8 1/2-year high of 43.43 set on Sept. 21. T-Mobile rose 2.4% on Monday. IBD’s Take: Get dialed in on T-Mobile US stock, and how it stacks up vs. its wireless rivals with IBD Stock Checkup One overhang on T-Mobile stock has been concern that mobile phone financing plans support lower-credit quality customers  and that a weakening economy would add company debt. Craig Moffett, an analyst at MoffettNathanson, says worries could be overblown. “T-Mobile’s blowout first-quarter results not only include falling bad debt, but also near record-low post-paid customer turnover,” said Moffett in a report. T-Mobile said it added 2.2 million subscribers in Q1, up from 1.8 million in the year earlier period. Prepaid subscriber additions jumped to 807,000 from 73,000. T-Mobile added  877,000 postpaid phone lines vs. 748,000 a year earlier. “Bad debt declined sequentially, highlighting efforts to improve credit policies,” said Mike McCormack, analyst at Jefferies, in a report. Verizon on April 21 reported Q1 results and said it lost 8,000 postpaid phone subscribers. AT&T reports Q1 earnings after the market close today. Verizon and AT&T shares fell fractionally Tuesdsay afternoon. Bellevue, Wash.-based T-Mobile raised its 2016 postpaid phone subscriber forecast to 3.4 million at its midpoint of guidance, up from its earlier estimate of 2.9 million. “The net add guidance raise was not all too surprising, since the Street was already projecting 3.6 million for 2016,” said Jennifer Fritzsche, an analyst at Wells Fargo in a report. T-Mobile expects adjusted EBITDA (earnings before interest, taxes, depreciation and amortization)  to be in the range of $9.7 to $10.2 billion, up from the previous guidance of $9.1 to $9.7 billion.