Verizon Communication Inc. (VZ) and AT&T Inc. (T) could Push the Telecom Sector higher in Second half


Telecom Sector is expected to undergo unprecedented growth in the years to come. Companies in the telecom sector look to capitalize on these growth opportunities. Verizon Communication Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) are currently the market leaders in this segment. CNBC’s Morgan Brennan reported on the Telecom Sector’s quarter results and performance of companies from it.

Verizon, is Verizon a good stock to buy, Michael McCormack, Verizon 2Q 2014,

Brennan said that Telecom sector is underperforming the S&P and grew by just 4.5% since the beginning of this year. She pointed out at Barclays analyst, Amir Rozwadowski’s comments that the telecom industry is trading at largest valuation discount compared to the broader market in over a decade.

She mentioned that there are only five companies in the S&P Telecom Index. Among those five companies, Verizon Communication Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) amass over 90% of the index’s market cap.

Brennan also said that analysts have observed two trends in Verizon’s quarter report, which could push the market up in second half of the year.

“First, Tablet growth. Verizon’s Tablet subscribers quadrupled this quarter versus last year. That’s offsetting declines in the smart phone business. The other trend, return of wire-line revenue. Verizon posted its first increase in seven years,” she said.

The wire-line revenue increase posted by Verizon is very small. Brennan feels that this trend might be reported by AT&T also in their report. She thinks that broadband is luring the customers away from traditional phone service.

Brennan also talked about two other companies to be watched in telecom industry, T-Mobile US Inc (NYSE:PCS) and Sprint Corporation (NYSE:S). She said that amid all speculation about mergers and acquisitions, T-Mobile has reported highest subscriber growth. Sprint Corp on the other is focused to build their network.

Brennan also mentioned two more companies, SBA Communications Corp (NASDAQ:SBAC) and American Tower Corp (NYSE:AMT). She said that cell phone towers could benefit from increased demand, as the need for faster speeds keep growing and she feels that American Tower has hit the all-time high due to this increased demand.

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