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Swisscom (OTC:SCMWY) Stock, Option Chain

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Swisscom

Swisscom is the incumbent telecom operator in Switzerland, with very high market share in mobile and fixed-line markets. It charges high prices compared with its competitors and other European peers due to the historical stability of the Swiss telecom market and a favorable regulatory environment. In 2024, Swisscom decided to merge its Italian business, Fastweb, with Vodafone Italia.

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The Zacks Diversified Communication Services industry is likely to benefit from the diminishing supply chain adversities, increased fiber densification and accelerated 5G deployment across the globe.

3 Stocks From the Thriving Communication Industry to Bet On

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Vodafone Group Plc stock falls as UK antitrust regulator begins investigation into its joint venture with CK Hutchison Holdings. VOD shares drop premarket.

Why Is Vodafone Stock Trading Lower Wednesday?

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Swisscom AG

The Zacks Diversified Communication Services industry is likely to benefit from the diminishing supply chain adversities, increased fiber densification and accelerated 5G deployment across the globe. However, high capital expenditures for 5G infrastructure upgrades, unpredictable raw material prices, geopolitical conflicts and elevated inventory levels amid a challenging macroeconomic environment and uncertain market conditions have dented the industry&#39;s profitability.
Nevertheless, Swisscom AG (OTC: <a class="ticker" href="https://www.benzinga.com/stock/scmwy#OTC">SCMWY</a>), Telefonica, S.A. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tef#NYSE">TEF</a>) and Telenor ASA (OTC: <a class="ticker" href="https://www.benzinga.com/stock/telny#OTC">TELNY</a>) should benefit in the long run from a higher demand for scalable infrastructure for seamless connectivity amid the wide proliferation of IoT and transition to cloud networks and related next-gen technologies.
Industry Description
The Zacks Diversified Communication Services industry comprises firms that provide a wide array of communication services, including wireless, wireline and Internet, to business enterprises and consumers. These companies offer mobile and wireline telephone services, high-speed Internet, direct-to-home satellite television and other value-added services. In addition to providing integrated information and communications technology services to businesses and governments, some of these companies operate as local exchange carriers or full-service providers of data center colocation and related managed services in state-of-the-art data center facilities. Some industry participants also provide IP networks, private lines, network management and hosting services, along with sales, installation and maintenance of major branded IT and telephony equipment.
What&#39;s Shaping the Future of the Diversified Communication Services Industry?
Focus on Low Latency, High Bandwidth Applications: The industry participants are investing considerably in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks to meet exponential video and data demand. These companies are rapidly transforming themselves from legacy copper-based telecommunications firms to technology powerhouses. At the same time, the industry participants continue to focus on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. Also, these firms offer the flexibility to better manage data traffic by leveraging indigenous software-defined networks to enable low-latency, high-bandwidth applications for faster access to data processing.
Diminishing ROI: Video and other bandwidth-intensive applications have witnessed exponential growth owing to the wide proliferation of smartphones and increased deployment of the superfast 5G technology. This has forced the industry participants to invest considerably in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks. These companies are rapidly transforming themselves from legacy copper-based telecommunications firms to technology powerhouses with capabilities to meet the growing demand for flexible data, video, voice and IP solutions. At the same time, the industry participants continue to focus on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. Although these infrastructure investments are likely to be beneficial in the long run, short-term profitability has largely been compromised. High raw material prices due to elevated inventory levels, economic sanctions against the Putin regime and intensifying war-mongering conditions in the Middle East have further affected the operation schedules of various firms.
Integrated Bouquet of Services: To improve profitability, the companies are increasingly focusing on providing support services to various small and mid-sized businesses (SMBs) with an integrated portfolio of voice, data and technology services. The firms are tailoring their services to suit individual business needs and are facilitating SMBs to better adapt themselves to necessary technology advancements.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Diversified Communication Services industry is housed within the broader Zacks Utilities sector. It carries a Zacks Industry Rank #46, which places it in the top 18% of more than 250 Zacks industries.
The group&#39;s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few diversified communication stocks that are well-positioned to outperform the market based on a relatively modest earnings outlook, let&#39;s take a look at the industry&#39;s recent stock market performance and valuation picture.
Industry Lags S&amp;P 500, Sector
The Zacks Diversified Communication Services industry has lagged the S&amp;P 500 composite and the broader Zacks Utilities sector over the past year, primarily due to macroeconomic headwinds.
The industry has lost 11.3% over this period against the S&amp;P 500&#39;s growth of 27.4% and the sector&#39;s decline of 3.6%. 
One-Year Price Performance
<img alt="" src="https://staticx-tuner.zacks.com/images/zadmin_tuner_image/chart 1_2024_07_12.jpg" style="height:348px; width:620px" />
Industry&#39;s Current Valuation
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 11.12X compared with the S&amp;P 500&#39;s 20.33X. It is trading below the sector&#39;s trailing 12-month EV/EBITDA of 15.13X.
Over the past five years, the industry has traded as high as 18.45X, as low as 10.89X and at the median of 13.07X, as the chart below shows. 
Trailing 12-Month enterprise value-to EBITDA (EV/EBITDA) Ratio
<img alt="" src="https://staticx-tuner.zacks.com/images/zadmin_tuner_image/chart 2_2024_07_12.jpg" style="height:162px; width:620px" />
3 Diversified Communication Services Stocks to Invest in
Swisscom: Headquartered in Bern, Switzerland, Swisscom offers mobile and fixed-network telecommunications services across the country and Italy. A wealthy domestic market with stable economic conditions, a relatively lax regulatory environment compared to the EU, a dominant market position and a strong leadership team are some of the key growth drivers of the company. With a complete spectrum of state-of-the-art data services, from leased lines to integrated solutions for corporate and residential customers, Swisscom&#39;s healthy growth momentum is likely to continue. The stock carries a Zacks Rank #2 (Buy). 
Price and Consensus: SCMWY
<img alt="" src="https://staticx-tuner.zacks.com/images/zadmin_tuner_image/chart 3_2024_07_12.jpg" style="height:471px; width:620px" /> 
Telefonica: Based in Madrid, Spain, Telefonica provides mobile and fixed communication services in Europe and Latin America. In recent years, Telefonica has invested heavily in the deployment and transformation of its network to provide excellent connectivity in terms of capacity, speed, coverage and security. The rollout of fiber and LTE (Long-Term Evolution) is set to drive considerable growth. Also, the company&#39;s 5G coverage has reached more than 2,800 towns and cities in the U.K. and about 116 cities in Brazil. The Zacks Consensus Estimate for current-year earnings has been revised upward by 9.7% since January 2024, while that for the next year is up 16.7% since July 2023. This Zacks Rank #2 stock has a VGM Score of A. The company delivered a trailing four-quarter earnings surprise of 46.3%, on average. 
Price and Consensus: TEF
<img alt="" src="https://staticx-tuner.zacks.com/images/zadmin_tuner_image/chart 4_2024_07_12.jpg" style="height:468px; width:620px" />
Telenor: Headquartered in Fornebu, Norway, Telenor offers mobile communication, fixed-line communication and broadcasting services worldwide. The company has completed a $15-billion merger to emerge as a leading telecom services provider in Malaysia that is likely to contribute significantly toward the growth of the country&#39;s digital ecosystem and economy. The Zacks Consensus Estimate for current-year earnings has been revised upward by 85.9% since July 2023. Telenor has a VGM Score of B. This Zacks Rank #2 stock is up 8.5% over the past year. 
Price and Consensus: TELNY
<img alt="" src="https://staticx-tuner.zacks.com/images/zadmin_tuner_image/chart 5_2024_07_12.jpg" style="height:442px; width:620px" />
<a href="https://www.zacks.com/commentary/2300776/3-stocks-from-the-thriving-communication-industry-to-bet-on?cid=CS-BENZ-FT-industry_outlook-2300776">To read this article on Zacks.com click here.</a>

Vodafone Group Plc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VOD#NASDAQ">VOD</a>) stock is trading lower Wednesday as the&nbsp;<a target="_blank" href="https://www.benzinga.com/markets/equities/23/06/32870328/vodafone-ck-hutchisons-uk-merger-under-cma-scrutiny-report" rel="noreferrer noopener">UK antitrust regulator</a>, Competition and Markets Authority (CMA), began its Phase 1 investigation into Vodafone UK&#8217;s joint venture agreement with&nbsp;&nbsp;CK Hutchison Holdings Ltd&nbsp;(OTC:<a class="ticker" href="https://www.benzinga.com/stock/CKHUY#OTC">CKHUY</a>) (OTC:<a class="ticker" href="https://www.benzinga.com/stock/CKHUF#OTC">CKHUF</a>) Three UK.
The deal combined the companies&#8217; telecommunications operations under one network provider.
The CMA now has up to 40 working days to evaluate the&nbsp;<a target="_blank" href="https://www.gov.uk/government/news/cma-launches-formal-investigation-into-vodafone-three-merger" rel="noreferrer noopener">deal</a>. It aims to analyze the proposed deal&#8217;s potential impact on competition for consumers and businesses.
Post-merger Vodafone will own 51% of the combined business, and CKHGT will have the remaining 49%.
On a separate note, Vodafone has turned down a revised proposal from Iliad SA to merge their respective Italian operations, halting Iliad&#8217;s efforts to strengthen its position in the highly competitive European telecom sector. The latest offer aimed to establish a joint venture, providing Vodafone with €6.6 billion in cash and a €2 billion shareholder loan, Bloomberg&nbsp;<a target="_blank" href="https://www.bloomberg.com/news/articles/2024-01-31/iliad-says-vodafone-rejected-its-offer-for-italian-unit?srnd=technology-vp&amp;sref=TBDibEcD" rel="noreferrer noopener">reports</a>.&nbsp;
In contrast, Iliad would receive €400 million in cash and a similar €2 billion loan. This offer included an additional €100 million in cash compared to Iliad&#8217;s initial bid and removed call options that could have increased Iliad&#8217;s control over time.
Iliad&#8217;s billionaire owner, Xavier Niel, flagged Vodafone&#8217;s challenges in the Italian market, which he sees as ripe for consolidation. Following the rejection, Iliad announced it would continue independently in Italy, focusing on gaining market share.
This rejection follows Vodafone&#8217;s previous dismissal of an €11.25 billion offer for its Italian business from an Iliad-supported consortium in 2022, citing it was not in the best interest of shareholders. The report further added Vodafone has been exploring different options, including mergers or sales of its Italian unit, with various parties like Fastweb, a subsidiary of Swisscom AG (OTC:<a class="ticker" href="https://www.benzinga.com/stock/SCMWY#OTC">SCMWY</a>), showing interest in a potential deal with Vodafone&#8217;s Italian operations.
Last November, Vodafone&nbsp;<a target="_blank" href="https://www.benzinga.com/news/earnings/23/11/35770040/why-british-telecom-giant-vodafones-shares-are-sliding-today" rel="noreferrer noopener">reported a revenue</a>&nbsp;decline of 4.3% YoY to €21.94 billion ($23.877 billion) in the first half of FY24. The stock lost 24% last year in stock value.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/31053924/newplot-29.png" alt="" class="wp-image-199777" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/31053924/newplot-29.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/31053924/newplot-29-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
The company completed 2,700 role reductions in the first half out of the 11,000 planned over three years.
Price Action: VOD shares traded lower by 3.50% at $8.54 premarket the last check Wednesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo via Wikimedia Commons

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