NEW YORK ( TheStreet) – With year-to-date gains of 9.8%, the telecom industry has been a relative disappointment, according to research firm Fidelity.
The sector, albeit outperforming the Dow Jones Industrial Average's
But before we get to that, let's take a look at some of the biggest headlines in 2014.
AT&T's (T) $48.5 billion deal for satellite TV provider DirecTV (DTV) , announced in July, was the first real sign of how serious AT&T has become in restoring its growth and diversifying its business.
Assuming that this deal gains regulatory approval in 2015, AT&T shares can reach $40 at some point during the year -- a much needed boost given its growth has slowed over the past couple of years. This merger can help AT&T grow both its base businesses and smartphone business, which makes up over 90% of the company's phone sales.
Meanwhile, where AT&T is looking to succeed, its smaller rivals have stumbled.
Hess' inability to get the Federal Communications Commission (FCC) to agree to the merger was one of many failed attempts to get Sprint out from under the shadows of AT&T and Verizon. While there's no guarantee that a Sprint and T-Mobile union would have been a real threat to the pair's larger rivals, it would have bought Sprint more time to figure out what its next growth strategy would be.
This was a long-shot to begin with. In 2011, AT&T attempted to pick off T-Mobile and was rebuffed by the FCC, which said in a statement, “Four national wireless providers is good for American consumers.”
Other notable deals involved British telecom giant Vodafone (VOD) , which picked off Spanish cable company Ono for 7.2 billion Euros, or $10 billion. Vodafone's goal is to add fixed-line networks to supplement the company's mobile services.
The deal gives Vodafone access to over 40% of consumers in Spain, as well as owning the largest "next-generation 4G network" in Spain that reaches over 7 million homes. With its stock down 12% year to date, Vodafone looks like a worthwhile bet for 2015, as it will be able to charge new customers a premium for its 4G network service.
Last year, Nokia spent $2.22 billion to buy the remaining portion of its joint-venture with Siemens (SI) called Nokia Siemens Network (NSN). Shortly thereafter, the company sold its cellular phone business to Microsoft (MSFT) . With these transactions, Nokia now has a more attractive business because it no longer competes with mobile behemoths Apple (AAPL) and Samsung (SSNLF) .
And if Nokia can leverage Alcatel-Lucent's strong patents, Nokia's entry into the telecom services business can become both a smooth transition and a lucrative one. At the same time, however, it is hard to bet on an Alcatel-Lucent surviving as a standalone company, because it's been unable to leverage its current assets to produce competing products to fight off the likes of Cisco (CSCO) and others are are going after its core optical networking business. It's shares have plummeted 18.2% in 2014.
TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate AT&T INC (T) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
You can view the full analysis from the report here: T Ratings Report