VZ

Verizon’s Investment Grade Credit Rating May Be Challenged

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On Thursday, Verizon (VZ) reported better than expected top- and bottom-line performance in its third quarter, which showed impressive subscriber additions and healthy iPhone sales. We continue to evaluate Verizon for addition to the portfolio of our Dividend Growth Newsletter, though we note its pursuit of Verizon Wireless has complicated matters quite a bit (given the outsize debt load it will take on). We’d like to see how the financials shake-out post-transaction, as there are quite a few moving parts that will negatively impact the firm’s Valuentum Dividend Cushion score (and potentially challenge its investment-grade rating). Verizon added 1.1 million net retail wireless connections and 927,000 net retail postpaid connections in the period, leading to quarter-end marks of 101.2 million total … Read more

Rising Rates Spur Verizon-Vodafone Deal

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Although financing isn’t fully secured yet, earlier this week Verizon (click ticker for report: ) and Vodafone (click ticker for report: ) agreed to a $130 billion deal for Verizon to acquire Vodafone’s 45% stake in Verizon Wireless. The deal values Verizon Wireless at nearly $290 billion (or nearly 10 times EBITDA), and it could immediately boost earnings per share by 2%-10%. Though this is certainly a large deal, we think Verizon acted quickly to capitalize on interest rates that have moved sharply to the upside in recent months (it didn’t want to wait for a further increase, which may have made the deal cost-prohibitive). As we noted in our prior discussion of the deal, rising rates and a declining … Read more

Are You Ready for Some Football? Google Is.

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Digital news firm AllThingsD broke the story that Best Ideas Newsletter portfolio holding Google (click ticker for report: ) could be in talks with the NFL over exclusive rights for the NFL Sunday Ticket package, which allows consumers to view every NFL game. Another Best Idea portfolio holding, DirecTV (click ticker for report: ), currently holds exclusive rights for Sunday Ticket through the 2014 season, which costs the firm $1 billion annually. Why It Makes Sense for Google On the surface, such an idea seems interesting for Google. With the exclusive Sunday Ticket package, Google could really make a push into the TV business. Google could even pair the package with a purchase of the Google Chromecast, a portable online … Read more

Apple Proves It Isn’t Dead

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On Tuesday, Best Ideas Newsletter portfolio holding Apple (click ticker for report: ) posted strong third quarter results and solidified our view that the iPhone is far from dead. Revenue increased 1% year-over-year to $35.3 billion, exceeding consensus estimates. Earnings per share were also better than the consensus had anticipated, falling 20% year-over-year to $7.47 per share. Year-to-date, free cash flow remains terrific at $37.5 billion or roughly 28% of total revenue. Image Source: AAPL 3Q FY13 Earnings Report Apple’s most important product, the iPhone, did phenomenally well as the firm sold 31.2 million units compared to the consensus estimate of 26.2 million. Remember how media pundits have claimed repeatedly that people only want Samsung Galaxies? We’ve made the argument … Read more

Verizon Shows Off Cash-Flow Generating Prowess in Second Quarter

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Thursday morning, Verizon (click ticker for report: ) reported in-line but strong second quarter results and raised its capital spending guidance for 2013, casting a positive light on the telecom equipment makers. We continue to pay very close attention to Verizon’s operating performance, as we consider the firm one of our top contenders for addition to our Dividend Growth portfolio. Verizon’s revenue performance during the quarter was solid (up more than 4% on a consolidated basis), with wireless service revenues and wireless retail service revenues both up about 8%. The company posted 941,000 retail postpaid net additions (up 6% year-over-year), driving total retail postpaid connections to 94.3 million (retail postpaid churn was 0.93% in the second quarter). Apple’s (click ticker … Read more

AT&T Tries Again…This Time: Leap Wireless

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Through the course of the past two years, we’ve seen a trend toward consolidation in the US wireless industry. AT&T (click ticker for report: ) failed to purchase T-Mobile (TMUS) in late 2011, but the firm has taken another stab at gobbling up spectrum and customers, announcing its intention to acquire Leap Wireless (LEAP) Friday for $1.2 billion plus the assumption of Leap’s net debt of approximately $2.8 billion. The deal works out to $15 per share, but AT&T will sell Leap’s Chicago spectrum with the proceeds going to Leap shareholders, which investors are pegging at $2+ per share of additional value. After regulators squashed AT&T’s purchase of T-Mobile, T-Mobile USA merged with MetroPCS. Not long after, Sprint (click ticker … Read more

Dish Won’t Go to War Over Clearwire; What’s Next?

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Late on Wednesday afternoon, news hit the tape that Dish Network (click ticker for report: ) would end its pursuit for Clearwire (CLWR), paving the way for Sprint (click ticker for report: ) to assume full control of the company for $5 per share (in line with our fair value estimate). Although we thought as well as the market thought (since shares of Clearwire were trading above the Sprint buyout price prior to the withdrawal) that Dish Chairman and founder Charlie Ergen would make a higher offer for Clearwire, Ergen may have known a bit more than he led onto during the bidding process, given that the FCC just approved draft rules for the auction of additional spectrum one day … Read more

Verizon Might Jump Into Canada

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After weeks of mounting speculation, US telecom giant Verizon (click ticker for report: ) has allegedly offered a deal valued at $700 million to acquire Canadian mobile provider Wind Mobile. In addition to potentially acquiring Wind Mobile, Verizon is also in talks to acquire another carrier, Mobilicity, and it could enter the bidding for government spectrum offers. Why is Verizon interested now? For years, Canadian regulations have previously disallowed a foreign entity from fully-owning a domestic telecom business, but it has only been recently that ownership rules have started it loosen. Still, the country remains dominated by the “Big Three” in the mobile carrier space: Rogers Communications (RCI), BCE (click ticker for report: ), and Telus (TU). However, Canadian regulators … Read more

Sprint May Be Settled But What About Clearwire?

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After a drawn-out saga, Dish Network (click ticker for report: ) dropped its pursuit of Sprint (click ticker for report: ) Friday. Sprint seems intent on accepting SoftBank’s offer, and we do not believe Dish could afford to offer more for the US’ third-largest wireless company. Yet, a dropped bid for Sprint does not mean Dish is out of the running for Clearwire (CLWR). On Thursday, Sprint raised its bid for Clearwire to $5 per share, a move valuing Clearwire at $14 billion (and something we had anticipated). Many may suspect that Dish’s decision to end its pursuit of Sprint as a declaration of peace, but we aren’t sure that is the case. Dish founder/chairman Charlie Ergen is well aware … Read more