CommScope, Lumen, Dish named as most 'distressed' telecom companies

CommScope, Lumen Technologies and Dish Network are facing extremely difficult financial situations and may pursue some kind of restructuring – including bankruptcy – as a result, according to ratings and analysis company Debtwire.

All three companies earned a ranking of 99 out of 100 on Debtwire's Likely to Distress (LTD) scoreboard.

"Debtwire's LTD score is the industry's first predictive score on leveraged corporate issuers and their likelihood of becoming Stressed, Distressed, or entering a Restructuring," according to the company. "The LTD score allows credit investors, sell-side dealers, and advisors to source new financing, restructuring, and trading opportunities by systematically tracking and predicting when corporate issuers will move through the Leveraged Corporate Lifecycle."

Debtwire added: "Scores are generated by a machine learning algorithm developed by a team of Debtwire data scientists, engineers, and journalists leveraging 20+ inputs from over 30 years of proprietary data."

Other North American companies on Debtwire's rankings this week include broadcasting company Cumulus Media, biotech company Emergent BioSolutions and cloud computing company Rackspace Technology.

Debtwire's findings on CommScope, Lumen Technologies and Dish Network come as little surprise. All three telecom companies have been struggling in recent months, and all have seen dramatic declines in their share price.

Lumen's stock is down 24% this year, while CommScope's is down 56%. Dish's stock (through parent EchoStar) is down 20% this year.

'Spiraling toward bankruptcy'

Indeed, analysts and others have been speculating for months about Dish's prospects for bankruptcy.

"Dish's business is spiraling towards bankruptcy. Gradually, then all at once, the declines are gathering speed," MoffettNathanson analyst Craig Moffett wrote last month.

Dish itself issued an ominous warning via a recent SEC filing, saying its financial situation raises "substantial doubt" that it can continue as a going concern.

Lumen has also been open about its financial struggles. For example, the company announced in late March the closing of a series of financial transactions that officials said gives Lumen "strengthened liquidity position."

"It clears the path, it gives us the financing we need, and it frankly puts a lot more confidence in the marketplace that we've now got time to do it," Lumen CFO Chris Stansbury said of the deal, according to Seeking Alpha.

Similarly, CommScope has been struggling in recent months. 

"We cannot rule out the risk of bankruptcy, but we believe the fundamentals have nearly bottomed and that the company can avert default," Raymond James analyst Simon Leopold wrote at the end of last year. "We consider CommScope a good company, yet it faces challenges."

CommScope officials have said the company won't resort to a fire sale of its assets. "We do not intend to sell assets on the cheap," CommScope EVP and CFO Kyle Lorentzen said in February on the company's most recent earnings call.

CommScope was exploring a sale of certain assets, including Ruckus Wireless and its access networks solution (ANS) unit, according to recent reports.

Slowdown in telecom

Perhaps it's not surprising that three telecom companies made it onto Debtwire's list of distressed companies this week. Telecom equipment suppliers of all shapes and sizes have been warning for months of a dramatic slowdown in demand from network operators.

So far, there are few signs the trend will reverse anytime soon. In fact, layoffs at equipment providers have been gaining steam.

Network operators are reducing headcount, too. Newer technologies like 5G haven't generated massive returns. Competition for core Internet subscribers appears to be rising. And government subsidies may be ending for millions of telecom customers in the US.