CANTO Weekly Newsletter – BNamericas 07/29/16 CR

American Tower sees 12% growth in LatAm ops in Q2 – Regional

High-value service strategy working for Telefónica – Regional

Level 3 reports Q2 results – Regional

Verizon to acquire Yahoo’s operating business – Regional

Dirk Harrison, Jamaica’s contractor general, has recommended that the country’s ministry of science, energy, and technology refrain from granting Jamaican-owned telco Symbiote, which operates under the Caricel brand, the domestic mobile spectrum license it recently won.

Harrison supported his claims with facts included in a report from the Office of the Contractor General (OCG), which shows irregularities in Symbiote’s board of directors and stakeholders. A second issue has to do with claims that Symbiote has been using certain spectrum frequencies without authorization.

Earlier this year, spectrum management authority SMA found three instances in which three towers belonging to Symbiote were transmitting in the 700MHz band, the frequency the company had applied for. The watchdog proceeded by sending the telco two cease and desist letters.

Symbiote claimed it was carrying out testing operations on an existing domestic mobile spectrum license. The company also asked for the SMA’s guidance on how to test its facilities while waiting the issuance of a license. Symbiote claims the regulator “flatly refused” to provide said assistance.

The SMA argues that, as stated in the law, only license holders can carry out testing. Although Symbiote was awarded a local mobile spectrum license in May, this has not been signed.

Harrison said he will be referring the report on Symbiote’s unauthorized spectrum use to the Police Commissioner, as this illegal activity breaches section 63 of the Telecommunications Act and Section 5 of the Radio and Telegraph Control Act.

For its part, Symbiote is contemplating legal action against the OCG, reported RJR News. The company claims it was never contacted during the course of the OCG’s investigation, and it expressed surprise at the publication of adverse findings before it was given an opportunity to be heard by the corresponding authorities. The telco also said the SMA’s lack of assistance should be subject to investigation.

American Tower sees 12% growth in LatAm ops in Q2 – Regional

Telecommunications tower operator American Tower saw 12% growth in its Latin American operations as its clients’ customers increasingly gained access to more advanced handsets and used more data, company CFO Thomas Bartlett said in a conference call.

Bartlett said that Brazilian operations, despite the economic uncertainty, had maintained a steady growth rate of 12% that is expected to be maintained this year.

American tower’s presence in Latin America includes Mexico, Colombia, Peru, Brazil and Chile

American Tower, which buys up telecommunications tower infrastructure and leases it back to the operator, has recently seen increased competition as Telefónica created it own global infrastructure company called Telxius, while Telefónica’s largest rival in Latin America, América Móvil, spun off its infrastructure into a separate rental company called Telesites, which began operations in December.

American Tower said total revenue increased 22.8% to US$1.442bn in 2Q16, while net profit was up 22.4% year-on-year to US$192mn.

High-value service strategy working for Telefónica – Regional

Telefónica‘s focus on capturing higher-value, data-centric clients was evident in the company’s Q2 results.

The company said that globally its LTE customer base was 2.1 times greater in 2Q16 than in the same quarter of last year. Mobile contract accesses were up 6% year-on-year and up 3 percentage points to 39% of the total base, while use of smartphones was up 18%, pay-TV customers grew 5% to represent 49% of total fixed broadband accesses and fiber and VDSÑ were up 31%.

In Telefónica’s Hispanoamerica region, which excludes Brazil, total accesses were up 2% to 134mn and smartphone and LTE penetration rose six percentage points to 39% and 10%, respectively, while broadband speeds above 4MB accounted for 56% of all speeds offered.

Telefónica launched LTE-A with carrier aggregation in Peru this week and in Chile in May.

In mobile, contract customers rose 1 percentage point to 23%. In the fixed business, 41% of customers had triple play or double play packages.

Total revenues for Hispanoamerica were up 3.6% year-on-year to 2.96bn euros (US$4bn) underpinned by a higher quality user base, which offset currency woes.

Telefónica Brazil said its data-centric and quality strategy has led to improved market position and solid financial results. Q2 revenues rose 0.9% to 2.66bn euros.

“It is important to highlight that this performance has been achieved despite a difficult macro environment and regulatory situation,” the company said in a statement.

The company saw a 0.7-percentage point increase in market share of mobile contracts and was the leader in LTE accesses with a market share of 36.9%.

In the fixed business, retail broadband accesses rose 2% year-on-year.

Globally Telefónica posted a net profit of 1.24bn euros

Level 3 reports Q2 results – Regional

Level 3 Press Release

BROOMFIELD, Colo., July 27, 2016 – Level 3 Communications, Inc. (NYSE: LVLT) today reported results for the second quarter 2016.

“With our focus on profitable growth combined with the strong operating leverage in the business, we continued to deliver expanded margins and improved profitability,” said Jeff Storey, president and CEO of Level 3. “We continue to invest in the business, remain confident in our ability to meet the networking needs of our enterprise customers and believe we can deliver stronger revenue growth in the future.”

Total revenue was $2.056 billion for the second quarter 2016, compared to $2.061 billion and $2.037 billion, on a reported and modified basis, for the second quarter 2015, respectively. The second quarter 2015 modified results exclude the results from the company’s Venezuelan subsidiary’s operations that was deconsolidated as of September 30, 2015.

In the second quarter 2016, the company generated net income of $149 million, basic earnings per share of $0.42 and diluted earnings per share of $0.41. This includes a charge of $40 million or, approximately $0.11 in basic earnings per share for the modification and extinguishment of debt. Excluding this charge, basic earnings per share was $0.53 per share for the second quarter 2016. For the second quarter 2015, the net loss was $13 million and basic and diluted loss per share were $0.04. The second quarter 2015 results included a charge of $163 million or, approximately $0.46 in basic earnings per share for the modification and extinguishment of debt. Excluding this charge, basic earnings per share was $0.42 per share for the second quarter 2015.

CNS Revenue

CNS Revenue was $1.956 billion in the second quarter 2016, increasing 0.7 percent year-over-year on a reported basis, and 2.8 percent year-over-year on a constant currency and modified basis.

“We continued to grow Core Network Services revenue this quarter, and saw improvement in both EMEA and Latin America Enterprise CNS revenue,” said Sunit Patel, executive vice president and CFO of Level 3.

“In North America, in conjunction with a two year contract extension, we issued a $5 million credit during the quarter. While this renewal put pressure on revenue in the short term, it also provides more than $100 million of additional revenue during the extension period, providing significant benefit to Level 3 over the long term. Additionally, revenue was affected due to higher disconnects at the lower end of our enterprise customer base.

“North America Enterprise CNS revenue grew 5.9 percent year-over-year compared to the second quarter 2015. Excluding the credit from the contract renewal, North America Enterprise CNS revenue grew 6.4 percent year-over-year.

“During the quarter, we also saw pressure in Wholesale CNS revenue from previous consolidations. As a result, Wholesale CNS revenue declined year-over-year in all three regions.”

Capital Market Transactions and Liquidity

During the quarter, on April 21, 2016, Level 3 Financing fully redeemed $775 million aggregate principal amount of its 7% Senior Notes due 2020. To fund the redemption of these notes, Level 3 Financing used the net proceeds from the March 2016 issuance of its 5.25% Senior Notes due 2026, along with cash on hand, to pay for principal, accrued interest, applicable premiums and transaction fees and expenses.

The company incurred a loss on extinguishment and modification of debt before taxes as a result of this transaction and related redemption of $40 million, or approximately $0.11 in basic earnings per share in the second quarter 2016.

As of June 30, 2016, the company had cash and cash equivalents of $1.291 billion.

2016 Business Outlook

“As we look at the remainder of the year, we are confident in and are reiterating our outlook for Adjusted EBITDA and Free Cash Flow,” said Patel. “Specifically, we expect full year 2016 Adjusted EBITDA growth of 10 to 12 percent and Free Cash Flow of $1.0 to $1.1 billion.”

All other outlook measures remain unchanged.

Verizon to acquire Yahoo’s operating business – Regional

PRESS RELEASE

By Verizon and Yahoo

July 25

Verizon Communications and Yahoo! today announce they have entered into a definitive agreement under which Verizon will acquire Yahoo’s operating business for approximately US$4.83bn in cash, subject to customary closing adjustments.

Yahoo informs, connects and entertains a global audience of more than 1bn monthly active users including 600mn monthly active mobile users through its search, communications and digital content products. Yahoo also connects advertisers with target audiences through a streamlined advertising technology stack that combines the power of their data, content and technology.

Lowell McAdam, Verizon Chairman and CEO, said: “Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers. The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”

Yahoo will be integrated with AOL under Marni Walden, EVP and President of the Product Innovation and New Businesses organization at Verizon.

Marissa Mayer, CEO of Yahoo, said: “Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL. The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”

Mayer added, “Yahoo and AOL popularized the Internet, email, search and real-time media. It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to US$1.6bn in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”

Tim Armstrong, CEO of AOL, said: “Our mission at AOL is to build brands people love, and we will continue to invest in and grow them. Yahoo has been a long-time investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance.”

Under Armstrong, AOL has invested in and grown global premium brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com, and market-leading programmatic platforms — including ONE by AOL for both advertisers and publishers.

Armstrong added, “We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth. Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”

The addition of Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities. Combined, AOL andYahoo will have more than 25 brands in its portfolio for continued investment and growth.Yahoo’s key assets include market-leading premium content brands in major categories including finance, news and sports, as well as one of the most popular email services globally with approximately 225mn monthly active users. Additional technology assets in the advertising space include Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising solution.

The deal is subject to customary closing conditions, approval by Yahoo’s shareholders, and regulatory approvals, and is expected to close in Q1 of 2017. Until the closing, Yahoo will continue to operate independently, offering and improving its own products and services for users, advertisers, developers and partners.

The sale does not include Yahoo’s cash, its shares in Alibaba Group Holdings, its shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents (called the Excalibur portfolio). These assets will continue to be held by Yahoo, which will change its name at closing and become a registered, publicly traded investment company. Yahoo will provide additional information about the investment company at a future date.