电信、电缆与卫星：Q4与2020年展望

1、Telecom, Cable and Satellite4Q 2019 and 2020 OutlookNorth America Equity ResearchDecember 2019Telecom Services, Cable, Satellite and Communications InfrastructurePhilip Cusick, CFA AC(212) 622-1444 HYPERLINK mailto:philip.cusick philip.cusickJ.P. Morgan Securities LLCSee the end pages of this presen

2、tation for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the object

3、ivity of this report. Investors should consider this report as only a single factor in making their investment decision. J.P. Morgan 4Q19 & 2020 Telecom Services/Cable & Satellite OutlookTop Picks for 2020Update on Our Big Questions for 2019WirelessVideo/BroadbandWhat Political Risks Could We Encoun

4、ter in 2020?Wireless Industry OutlookCompetition Remains High, but StableHow Do Cables Ramping Wireless Share Gains Impact Incumbent Operators?Cable Offers Measured Rollout, but CBRS Tests Likely in 2020Telecom Infrastructure OutlookAT&Ts FirstNet Build Likely Slows After 2020, Verizon Steady, and T

5、-Mobile Waits on M&AData Center Trends Look Solid for Colocation in 2020, Waiting for WholesaleVideo/Broadband OutlookWe Remain Negative on Video Ecosystem Despite Lessening Impact from vMVPDsBroadband Penetration at 79%, Expected to Be Steady in 2020AT&T (T Overweight PT $42)AT&Ts wireless business

6、 remains solid with service revenue growth, profitability, and stable competitive environment. Entertainment Group is struggling with regard to subscribers and revenue, but profit decline should be moderate. Strong free cash flow generation supports debt reduction, dividends, and stock buyback.At $3

7、8/share (7.3x 2020E EV/EBITDA and 5.5% dividend yield), we believe the stock could grind higher as the company aggressively repurchases stock early in 2020 and delivers on wireless, EG margins, and WarnerMedia supported by HBO Max. Upside could come from investor confidence in Ts ability to hit its

8、2020 and longer term targets for revenue, margins, and adj. EPSOur Overweight rating is despite modeling significantly below managements targets.Comcast (CMCSA Overweight PT $51)Despite a step-up in investments for Peacock, Sky (SkyQ box + Italian broadband launch), and Theme Parks (Epic Universe +

9、Beijing), we continue to like Comcast heading into 2020 on strong cable execution and a long runway of growth in “connectivity.”We now model $14b in 2020 FCF, after adjusting for the above investments, and believe Comcast shares are attractively valued at 7.8x 2021E EV/EBITDA and 13.0 x FCF/share.Re

10、cent concerns of AVOD/Peacock dilution may be overblown, and investors could be more confident after the companys upcoming investor day scheduled for January 16 and earnings in late January.NBC results should improve in 2020 on inflection at studios, political advertising, Olympics, and Nintendo ope

11、ning at USJ.Viasat (VSAT Overweight PT $90)We recently upgraded VSAT to Overweight given increased confidence in the sustainability of EBITDA growth.In our view, the companys Government Systems segment is well positioned for long-term growth due to a robust product portfolio, and we model 15% CAGR t

12、hrough 2025E, which should help drive 20% consolidated EBITDA growth for the next 5 years.VSAT currently trades at 11.7x 2021E EBITDA, which we feel is justified given expected 39% EBITDA growth in 2020. Our $90 price target implies 13.8x 2021E EV/EBITDA.2019 BigQuestionsStatusWhat We Thought / What

13、 HappenedWhat Is the Focus Now?Will competition remain steady across wireless?Rolled ForwardExpectations: Thought promo levels would remain steady and focused on equipment vs service promos in 2020.Reality: Carriers ramped promos somewhat in 2H, though the competitive environment remains largely rat

14、ional. Cable MVNOs posed less of a threat than feared as economic tailwinds and share from prepaid drove 8% increase in postpaid phone net adds (445k higher y/y).Regardless of whether or not the S + TMUS deal goes through, we expect wireless competition to remain at this level in 2020. If approved,

15、Dish could become an insurgent in 2021-22.Look for focus of promotional activity to remain on equipment vs service level.Cable likely ramps up CBRS-based cellular tests in 2020How do cables ramping share gains impact incumbent wireless operators?Rolled ForwardExpectations: Difficulty for Big-4 opera

16、tors to grow as cable MVNOs ramp.Reality: A near doubling of postpaid voice adds from cable did not impact Big-4 as much as we thought with the industry nearing decade highs. A large portion of postpaid voice growth appears to be coming from prepaid.We model 1.8m net adds for cable in 2019 growing t

17、o 2.0m in 2020 as CHTR and ATUS scale further. It will be interesting to see how cable growth trends from hereCan tower stocks still work?Rolled ForwardExpectations: Cautiously positive on towers into 2019 due to risks from potential industry consolidation offsetting FirstNet tailwindReality: Tower

18、stocks outperformed the RMZ on average by 12% YTD amid decade-high levels of domestic activity with AT&Ts FirstNet, and T-Mobiles 600 MHz spectrum; consolidation fears abated and international leasing activity remained robustDoes domestic activity slow as FirstNet heads toward completion in 2021? Ho

19、w quickly does TMUS/S spending return post merger resolution?How far is the bull case of a reinvigorated Verizon pushed out due to potential C-Band clearing delays?Will rates rebound?2019 BigQuestionsStatusWhat We Thought / What HappenedWhat Is the Focus Now?How will linear video providers be impact

20、ed by expanding vMVPDs?Rolled ForwardExpectations: Legacy PayTV losses of 4.0m and vMVPD net adds of 2.2m in 2019.Reality: 6.1m legacy ecosystem losses and vMVPD net adds estimated 2.1m. Sizable AT&T losses, rising costs, and increased alternatives drove the sharp acceleration in video declines on t

21、he legacy side. vMVPD growth is slowing as services raise price.Legacy video ecosystem remains pressured, and we expect losses to accelerate as DTC services launch and value proposition deteriorates. Model 5.4m legacy linear video losses in 2020.Look for the vMVPD ecosystem to rationalize and growth

22、 to slow as prices rise and DTC offers enter the market.How does broadband share shift as penetration growth slows?Rolled ForwardExpectations: Residential broadband net adds of 2.4m in 2019 with cable better, shrinking telco, and steady satellite net adds.Reality: Residential broadband net adds of 2

23、.4m down 2% y/y following a 22% improvement in 2018. Cable results up 6% y/y, but telcos and satellite softer than expected. Solid HH formation continues to buoy broadband volumes.Expect 2020 residential BB net adds of 2.2m (down 6% y/y), which could prove conservative given solid cable growth, and

24、shrinking DSL base for telcos. Economic tailwinds should persist supporting HH formation and growth in BB.Model 79.7% penetration of HHs for residential BB (from 78.5% in 2019).Are investors right to be concerned about leverage?ConcludedExpectations: Focus on de-levering at AT&T and Comcast followin

25、g 2018 acquisitions; we model them exiting 2019 at 2.6x and 2.9x leverage, respectively.Reality: AT&T and Comcast focused on debt reduction in 2019, but AT&T has messaged that it will begin to buy back shares this year. Comcast has tamed expectations for a renewed buyback program in 2020, and invest

26、or hopes now focus on 2021.Market fears around leverage have disappeared, and companies are being pushed to return capital.AT&T has started to buy stock and entered into a $4b ASR to retire about 100m shares in 1Q20, and we model Comcast buying stock in 2021. Depending on spectrum sales, Verizon cou

27、ld look to return capital this year.Presidential/Electoral Cycles Impact on 2020Net Neutrality via Title II likely to return if a Democratic President is elected in 2020.Nothing has changed for consumers regarding broadband since Title II was eliminated in June 2018, so we could see less fear among

28、investors if it comes backMore likely impact is expansion of broadband availability or subsidizing, which is starting to be a focus for Democratic candidatesIndications of corporate tax increases could weigh on our companies, particularly AT&TJ.P. Morgan Strategy “In terms of US Presidential Electio

29、ns, we think that the two most likely outcomes are Trumps re-election or an experienced centrist Democrat, which would be neutral or positive for markets (at least initially). A progressive left Democratic candidate could be a significant downside risk for the market; however, we assign a low probab

30、ility to this outcome.”Broadband-specific agendas from current Democratic candidatesBernie Sanders “High-Speed Internet for All”Provide $150b in infrastructure grants and technical assistance for municipalities and states to build publicly owned, controlled, co-operator or open access broadband netw

31、orks.Internet service providers would be required to offer a Basic Internet Plan, which would be fully subsidized for low income households. Data caps and throttling would be eliminated.High-speed internet service would be redefined as 100 Mbps down/10 Mbps up.Existing antitrust authority would be u

32、sed to break up internet service provider and cable monopolies. In addition, service providers would be barred from providing content and anti-competitive vertical conglomerates would be unwound.Broadband providers would be classified as common carriers under Title II and net neutrality regulations

33、would be reinstated.Ensure broadband infrastructure is resilient to the effects of climate change.Warren Infrastructure/broadband planGrant $85b in federal money to subsidize building out broadband networks in rural communities.Award funding to only electricity and telephone cooperatives, nonprofit

34、organizations, tribes, cities, counties, and other state subdivisions, not major for-profit ISPs for fiber infrastructure for broadband in rural communities.Require groups that receive this federal funding to subsidize their services for low-income households.Appoint FCC commissioners who support ne

35、t neutrality.Rural Digital Opportunity Fund on the docket todayCurrent NPRM for a $20.4bn budget over 10 years (vs. $2.15bn annual for CAF-II), promoting rural broadband developmentPrioritizes tiers of higher speeds and lower latency, minimum speeds of 25/3 Mbps (vs. CAF-II at 10/1 Mbps)Phase 1 targ

36、ets areas that are wholly unserved with at least 4m homes and SMBs; Phase II will target partially served areas2020 TELECOM OUTLOOKTelecom: 2020 Big Question #1 Will competition remain steady across wireless?Wireless competition and promotional landscape ramped somewhat in 3Q19 with more promos from

37、 VZ, but very focused on new customer promotions; holidays bring typical uptick in promotional activity but nothing crazyPromotions remain focused on handsets/new customer BOGOs, while service pricing is creeping higherMost carriers added or increased insurance, activation, or service fees this year

38、Video giveaways (Hulu, Netflix, HBO, Disney+) and faster speeds drive usage higher, pushing customers to bigger buckets or unlimited plansTo get the best service (free video, tethering, international, 5G, etc.) customers are being pushed to higher tiered unlimited plansA combined Sprint-T-Mobile cou

39、ld be more aggressive long term, but the near-term integration would limit any aggressive movesSprint stand-alone would need to invest in its network to raise quality/consistencyComcast & Charter MVNOs were not as disruptive as feared, but we expect them to trial cellular on CBRS and possibly buy sp

40、ectrum in 2020ATUS service pricing is very aggressive, but we expect very limited uptake outside of Long IslandWireless industry net adds have come in better than our expectation in 2019, driven by Big-4 with Cable in line, due to economic growth, more flexible unlimited offerings, which include str

41、eaming services, and the move from prepaid to postpaidWe model net add growth faster in 2020 as customer credit remains healthy and carriers begin to leverage “Nationwide 5G” networksPostpaid churn has remained relatively low for 2019E (0.99%), and we expect similar levels in 2020E (1.00%)Postpaid a

42、dds have benefited from positive economic trends and the migration from prepaid to postpaid continues as credit scores have improved and carriers have become more targeted in their offerings to customersAccording to FICO blog, the average credit score in April 2019 was 706 an all-time high which exp

43、lains some of the share shift from prepaid to postpaid as more customers now qualify given the rise in credit scoresNet reported migrations from prepaid to postpaid (for T, S, TMUS) totaled 478k through 3Q19 (18% of total industry net adds YTD vs 17% in 2018, 16% in 2017), including 717k prepaid to

44、postpaid (S, TMUS) and 239k postpaid to prepaid flows at AT&TCables share of wireless net adds has risen over the past year, and we expect to remain at these levels going forwardFor the first three quarters of 2019, cable accounted for 32% of net adds (up from 19% in 2018); we model 1.8m cable net a

45、dds in 2019 and 2.0m in 2020T-Mobile and Sprint prices are already substantially below that of AT&T and Verizon: $110 for 2 lines of mid-level unlimited vs $130/$140.Activation and insurance fees have been creeping up for most carriersBottom Line: Competition remains at a high level, but we do not e

46、xpect value destruction in the wireless industry and could see margin improvement with service revenue growth and stable promotionsCable Impact Incumbent Wireless Operators More in 2020?Following its midyear 2018 launch of Spectrum Mobile, Charter sub growth ramped throughout 2019We estimate 947k Sp

47、ectrum Mobile net adds in 2019 and for the service to grow to 2.05m subs by YE20 (966k net adds)4Q and 2020 subscriber improvements are expected to be driven by improved salesforce sell-in, deployment across more sales channels, as well as expanded BYOD options.Charter does not disclose service-leve

48、l take-rates, but we believe the company prioritizes unlimited ($45/month) vs $/GB ($14/GB).Comcasts Xfinity Mobile scaling nicely.We look for Comcast to add 775k subs in 2019 (2.0m subs at YE19) and 814k net adds in 2020 (2.8m total subs).On August 1 Comcast announced changes to its by-the-gig pack

49、ages, which offer more flexible shared data plans to subs.CMCSA has talked about achieving “neutral economics” at “mid- to high-single-digit penetration” of broadband subs and “breakeven in 2021.” We estimate breakeven EBITDA in 4Q21 with positive EBITDA in 2022.Altice MVNO with Sprint/AT&T launched

50、 later than expected should improve from hereAltice Mobile launched September 5, but growth was somewhat limited during the quarter due to limited e-commerce/online sales channel availability despite more aggressive pricing than initially expected.Altice Mobile was launched across the companys entir

51、e footprint, but we believe the Optimum footprint will be the predominant focus (5m homes passed) due to the network improvements from 19k strand-mounted small cells.Jury still out on whether cable will decide to build its own underlying macro network to help offload network traffic over time.Cable

52、could leverage AT&T against Verizon this year for more customer control and better data pricingCable operators appear interested in the unlicensed CBRS (3.5 GHz) band and have conducted tests. We find it unlikely that Cable will be interested in C-Band spectrum that may not come to market in 2020.eS

53、IM availability will ramp up this year, making a cellular underlay more viableAmong existing MSOs, Charter seems to be the most vocal about building a small cell network to offload traffic.Bottom Line: As expected Big-4 postpaid voice net adds were down in 2019 as cable MVNOs ramped. However, total

54、industry growth neared all-time highs.Estimated Big-4 + Cable Postpaid Voice Net Adds7,0006,0005,0004,0003,0002,0001,000-3,9793804,5294,47291,7773,7891,8593,8921,9464,1141,9784,3572,0734,5251,7794,1859902,008201720182019E2020E2021E2022E2023E2024E2025ESource : Company reports and J.P. Morgan estimate

55、s.Cable Voice Net AddsBig-4 Voice Net AddsVoice Adds Are StrongerIndustry Postpaid Voice Net Adds (including cable)We estimate total industry postpaid net adds of 2.9m in 4Q and 8.5m for 2019, versus 2018s 3.2m/8.5m. We estimate 7.7m adds in 2020 including 2.0m from cableFor postpaid phones, we esti

56、mate 2.1m adds in 4Q19, flat with 4Q18 (including cable). For 2019 we model 6.0m vs 5.5m in 2018 and 4.4m in 2017.Activity levels in 4Q consistent with year-to- date trends of low churn (1.06%) and upgrades (5.7%). In 2020 we model upgrades up 14%, including 4Q20 up 25%.We model postpaid phone gross

57、 adds flat y/y but handset sales up 14% y/y in 4Q20Today we calculate 221m total industry postpaid phonesIn 2020 we model postpaid phone growth of 6.5mOther data devices likely to continue growing including tablets, Apple Watch, other wearables, and telematics2,0001,7501,5001,2501,00075050025002020E

58、2019E201820172016201520142013201220111,6001,4001,2001,0008006004002000-200-4001Q2Q3Q4Q2014 2015 2016 2017 2018 2019E 2020EIndustry Postpaid Net Adds-2,0004,0006,0008,00010,00012,00014,000Postpaid Net Adds by Carrier (including cable)1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19E 4Q19E 1Q20E

59、 2Q20E 3Q20E 4Q20E AT&T Verizon Sprint T-Mobile Comcast Charter Altice USASource (all): Company reports and J.P. Morgan estimates.10Increasingly Focused; Cable Gains as T-Mobile Slows SlightlyVerizons gross add share rebound to 33% in 3Q19 as the company has become more aggressive competitively.T-Mo

60、biles voice gross add share has declined from 24% in 2017 to 21% in 2019 due in part to stabilization at AT&T and Verizon as well as gains from cable.AT&T focused on profitable subs over the past few years and lost voice add share, but with its FirstNet rollout complete and substantial capacity adva