EARNINGS PREVIEW: Telecom Companies Diversify To Boost Revenue
14 Juli 2011 - 7:11PM
Dow Jones News
TAKING THE PULSE: AT&T Inc. (T) still expects to complete
its $39 billion acquisition of T-Mobile USA from Deutsche Telekom
AG (DTEGY, DTE.XE) by early next year, in spite of strong
opposition from different quarters. While many wonder whether
AT&T will be required to make certain concessions, such as
divestitures, to get regulatory approvals, other wireless providers
are taking steps to remain competitive. Some of their plans include
adding new smartphone and tablet offerings, expanding into
cloud-based services, and boosting network capacity.
COMPANIES TO WATCH:
AT&T Inc. (T) - reports July 21
Wall Street Expectations: Analysts polled by Thomson Reuters
recently expected a second-quarter profit of 59 cents a share on
$31.3 billion in revenue, compared with 61 cents a share, before a
7-cent investment gain, on revenue of $30.8 billion a year
earlier.
Key Issues: The telecommunications company appeared to have
weathered the loss of being the exclusive U.S. carrier for the
popular Apple Inc. (AAPL) iPhone last quarter, though the company
spent heavily on smartphone subsidies. Like many of its peers,
AT&T is targeting alternative devices such as tablets and
e-readers for new sources of revenue. Another growth opportunity
would be its T-Mobile acquisition, which will face heavy scrutiny
over the next year. Earlier this month, Macquarie Equities
downgraded AT&T to neutral from outperform, citing a
slower-than-expected recovery in the company's wireline operation
for business customers, challenges to wireless revenue growth and a
lack of clarity on the status of the T-Mobile deal.
Verizon Communications Inc. (VZ) - reports July 22
Wall Street Expectations: Analysts forecast a profit of 55 cents
a share on revenue of $27.4 billion. A year earlier, the company
reported a loss of 7 cents a share on revenue of $26.8 billion.
Excluding items such as labor and merger-related costs, earnings
were 58 cents a share.
Key Issues: Verizon has projected revenue will accelerate each
quarter throughout the year. Last quarter, the company more than
tripled its profit with the addition of the iPhone and attracted
new subscribers to Verizon Wireless, which it owns jointly with
Vodafone Group PLC (VOD, VOD.LN), with devices for its
next-generation network, such as HTC Corp.'s (HTCXF, 2498.TW)
ThunderBolt. Verizon also closed its $1.4 billion acquisition of
data center operator Terremark Worldwide in April, a move that
expands its networking and cloud-computing services. Like many
telecom operators, the company is moving toward selling processing
power, data storage and software-hosting services over the Internet
to replace its shrinking landline business.
Sprint Nextel Corp. (S) - reports July 28
Wall Street Expectations: Analysts forecast a loss of 12 cents a
share on $8.3 billion in revenue. The company reported a loss of 25
cents a share, including a 10-cent charge related to the increase
in valuation allowance on deferred tax assets, on revenue of $8
billion a year earlier.
Key Issues: Sprint Nextel's prepaid and wholesale businesses
helped add 1.1 million net new customers last quarter, the most in
five years. Yet Sprint's streak of losses continued as the once
sole carrier with a next-generation wireless service battles new
entrants in the 4G arena, including Verizon, AT&T and T-Mobile.
The third-biggest wireless carrier in the U.S. is reportedly in
advanced talks to rent space on its wireless network to startups
LightSquared and Clearwire Corp. (CLWR), according to The Wall
Street Journal, citing people familiar with the matter. The deal
would give Sprint another revenue source and access to spectrum
needed to support a nationwide 4G network of its own.
Motorola Mobility Holdings Inc. (MMI) - reports July 28
Wall Street Expectations: Analysts forecast a profit of 6 cents
a share on $3.1 billion in revenue. The smartphone and set-top box
company split from Motorola Inc.'s business mobile and networks
operation in January.
Key Issues: Motorola Mobility is trying to tap into the growing
tablet market, currently dominated by the Apple iPad. Motorola
Mobility shipped more Xoom tablets than projected in the first
quarter and expects more growth for the second quarter with
expanded distribution to different carriers and countries. But
analysts at BMO downgraded the company to underperform late last
month, saying Motorola's share of the Android-powered smartphone
market plunged to 14% from 33% in the year-earlier first quarter
and more competition is on the way. Most of the company's revenue
comes from smartphones and Motorola is working to diversify its
customer base to defend against the potential loss of T-Mobile, a
key customer.
CenturyLink Inc. (CTL) - reports Aug. 3
Wall Street Expectations: Analysts forecast a profit of 66 cents
a share on $4.4 billion in revenue. The company's profit was 79
cents a share, or 88 cents excluding merger and other impacts, on
revenue of $1.8 billion a year earlier.
Key Issues: The company, which primarily serves rural areas, is
targeting business customers as its consumer subscriptions continue
a steady decline, with cellphones saturating the market. The
company's $2.5 billion purchase of Savvis Inc. (SVVS) is expected
to close Friday, a move that expands CenturyLink's hosting and
cloud-based services and would further increase its ability to
attract business customers. This is also CenturyLink's first
quarterly report since its $10.6 billion acquisition of Qwest
Communications in April created the nation's third-largest landline
communications provider.
(The Thomson Reuters financial estimates and year-earlier
figures may not be comparable due to one-time items and other
adjustments.)
-By Melodie Warner, Dow Jones Newswires; 212-416-2283;
melodie.warner@dowjones.com
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