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Telecom Stock Roundup: Nokia and Apple Drop Patent Lawsuit, Verizon Conducts 5G Trials
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The telecom industry saw strong performances by most of the key stocks last week. A few developments even made to the headlines.
Apple Inc. (AAPL - Free Report) and Nokia Corp (NOK - Free Report) announced the settlement of their patent dispute and forged a new business partnership. In Dec 2016, Apple filed a lawsuit against certain patent assertion entities (PAEs) claiming that Nokia partnered with these to extract more money.
However, Nokia refused to license certain others that it uses, possibly because it was asking for higher rates than would be required under the fair, reasonable and non-discriminatory (FRAND) policy typically used in case of standard essential patents. The two tech giants have chosen to bury the hatchet as patent wars are often characterized by long-drawn litigations..
The U.S. telecom behemoth Verizon Communications Inc. (VZ - Free Report) is currently conducting field trials for its upcoming 5G wireless network with partners. The company is considering mobile hotspot and home-based fixed wireless for initial deployment of the next-generation 5G wireless networks in the U.S. in 2018. Currently, it is conducting customer trials in 11 U.S. cities for fixed 5G wireless network.
Telecom giant AT&T Inc. (T - Free Report) is gradually expanding 4G LTE wireless networks in Mexico. Currently, its service spans across 111 Mexican cities. Subscribers in the AT&T’s covered areas just need an LTE-enabled smartphone and SIM card to access the super-fast network at no extra charge. The company currently covers 70% of its subscribers’ footprint with LTE networks.
Regional wireline telecom operator Frontier Communications Corp. recently suffered a setback as Moody’s Investors Service downgraded the corporate family rating (CFR) of the company to B2 from B1 based on its persistently weak operating results. The rating agency also downgraded Frontier Communications’ probability of default rating (PDR) to B2-PD from B1-PD, its secured rating to B1 from Ba3 and its unsecured rating to B2 from B1.
The company’s speculative grade liquidity (SGL) remains unaffected at SGL-2. The negative outlook assigned by Moody’s also remains unchanged.
Per a recent report by Leichtman Research Group Inc. (LRG), the cable multi-service operators (MSOs) in the U.S. have successfully maintained lead over telecom operators in the high-speed broadband (Internet) market. In the first quarter of 2017, the top two cable MSOs, namely, Charter Communications Inc. (CHTR - Free Report) and Comcast Corp. (CMCSA - Free Report) added 458,000 and 430,000 high-speed broadband subscribers, respectively.
1. Under the renewed agreement, Nokia will supply “certain network infrastructure product and services” to the Cupertino-based giant, while Apple will once again start selling Nokia’s digital health products in its retail and online stores. Apple also stated that Nokia will receive an “up-front cash payment” with “additional revenues during the term of the agreement.” Nokia is anticipated to use the cash to fund capital allocation plans. (Read more: Apple & Nokia End Patent Row, Forge New Partnership)
2. Verizon claims that its 5G network will provide a download speed of 1 Gbps (gigabit per second) which is 200 times the throughput of the currently available standard 4G LTE network. Latency period of data delivery will be in single milliseconds. Further, 5G technology is designed to be more power efficient than any other standard wireless networks available these days. Therefore, 5G-enabled mobile devices are likely to last much longer than their 3G or 4G counterparts. (Read more: Verizon On Track to Deploy 5G Fixed Wireless in 2018)
3. AT&T also plans to create a North American mobile service area covering more than 400 million customers and business enterprises in Mexico and the US. In Oct 2015, the company introduced a Pan-American cross-border unlimited voice and text-messaging service for new and existing subscribers of the post-paid plans 'AT&T Unidos' and 'AT&T Unidos Prepago' at no additional cost. (Read more: AT&T's 4G LTE Network Expansion Plans on Track in Mexico)
4. Frontier Communications continues to be significantly challenged by slow economic recovery in its service territories and the loss of legacy fixed telephony business to wireless and other offerings. The persistent decline in access lines continues to tighten local service revenues, which accounts for most of Frontier Communications’ overall revenues. (Read more: Frontier Communications Faces Downgrade in Credit Ratings)
5. According to data compiled by LRG, 14 prime cable TV and telecom operators jointly had approximately 93.9 million high-speed Internet subscribers at the end of the first quarter of 2017, representing more than 95% of the nation’s total broadband market. Of the count cited, cable MSOs commanded nearly 59.35 million subscribers (63.2%) while the remaining 34.55 million customers (36.8%) were serviced by telecom operators. (Read more: Cable MSOs Maintain Lead in High-Speed Broadband Market)
Price Performance
The following table shows the price movement of major telecom players over the past week and last six months.
Company
Last Week
Last 6 Months
VZ
0.63%
-11.11%
T
1.57%
-2.70%
S
10.76%
3.55%
TMUS
6.52%
24.36%
CHTR
-0.35%
19.43%
TEF
2.10%
34.13%
AMX
4.93%
38.31%
CMCSA
5.19%
16.63%
DISH
0.64%
13.23%
In the last five trading sessions, share price movement of most of major telecom stocks was positive barring Charter Communications. Sprint (10.76%), T-Mobile US (6.52%), Comcast (5.19%) and America Movil (4.93%) gained substantially in the same time period.
Similarly, in the last six months, the price performances of most of the major telecom stocks were positive. Among the stocks that gained substantially are America Movil (38.31%), Telefonica (34.13%), T-Mobile US (24.36%), Charter Communications (19.43%), Comcast (16.63%) and DISH Network (13.23%).
What’s Next in the Telecom Space?
We do not expect any significant change in the telecom industry or in the overall global economic factors that might affect the industry in the coming week. Therefore, we expect stocks to trade in line with the broader market movement at least in the near-term.
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Image: Bigstock
Telecom Stock Roundup: Nokia and Apple Drop Patent Lawsuit, Verizon Conducts 5G Trials
The telecom industry saw strong performances by most of the key stocks last week. A few developments even made to the headlines.
Apple Inc. (AAPL - Free Report) and Nokia Corp (NOK - Free Report) announced the settlement of their patent dispute and forged a new business partnership. In Dec 2016, Apple filed a lawsuit against certain patent assertion entities (PAEs) claiming that Nokia partnered with these to extract more money.
However, Nokia refused to license certain others that it uses, possibly because it was asking for higher rates than would be required under the fair, reasonable and non-discriminatory (FRAND) policy typically used in case of standard essential patents. The two tech giants have chosen to bury the hatchet as patent wars are often characterized by long-drawn litigations..
The U.S. telecom behemoth Verizon Communications Inc. (VZ - Free Report) is currently conducting field trials for its upcoming 5G wireless network with partners. The company is considering mobile hotspot and home-based fixed wireless for initial deployment of the next-generation 5G wireless networks in the U.S. in 2018. Currently, it is conducting customer trials in 11 U.S. cities for fixed 5G wireless network.
Telecom giant AT&T Inc. (T - Free Report) is gradually expanding 4G LTE wireless networks in Mexico. Currently, its service spans across 111 Mexican cities. Subscribers in the AT&T’s covered areas just need an LTE-enabled smartphone and SIM card to access the super-fast network at no extra charge. The company currently covers 70% of its subscribers’ footprint with LTE networks.
Regional wireline telecom operator Frontier Communications Corp. recently suffered a setback as Moody’s Investors Service downgraded the corporate family rating (CFR) of the company to B2 from B1 based on its persistently weak operating results. The rating agency also downgraded Frontier Communications’ probability of default rating (PDR) to B2-PD from B1-PD, its secured rating to B1 from Ba3 and its unsecured rating to B2 from B1.
The company’s speculative grade liquidity (SGL) remains unaffected at SGL-2. The negative outlook assigned by Moody’s also remains unchanged.
Per a recent report by Leichtman Research Group Inc. (LRG), the cable multi-service operators (MSOs) in the U.S. have successfully maintained lead over telecom operators in the high-speed broadband (Internet) market. In the first quarter of 2017, the top two cable MSOs, namely, Charter Communications Inc. (CHTR - Free Report) and Comcast Corp. (CMCSA - Free Report) added 458,000 and 430,000 high-speed broadband subscribers, respectively.
Comcast currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Read the last Telecom Stock Roundup for May 18, 2017.
Recap of the Week’s Most Important Stories
1. Under the renewed agreement, Nokia will supply “certain network infrastructure product and services” to the Cupertino-based giant, while Apple will once again start selling Nokia’s digital health products in its retail and online stores. Apple also stated that Nokia will receive an “up-front cash payment” with “additional revenues during the term of the agreement.” Nokia is anticipated to use the cash to fund capital allocation plans. (Read more: Apple & Nokia End Patent Row, Forge New Partnership)
2. Verizon claims that its 5G network will provide a download speed of 1 Gbps (gigabit per second) which is 200 times the throughput of the currently available standard 4G LTE network. Latency period of data delivery will be in single milliseconds. Further, 5G technology is designed to be more power efficient than any other standard wireless networks available these days. Therefore, 5G-enabled mobile devices are likely to last much longer than their 3G or 4G counterparts. (Read more: Verizon On Track to Deploy 5G Fixed Wireless in 2018)
3. AT&T also plans to create a North American mobile service area covering more than 400 million customers and business enterprises in Mexico and the US. In Oct 2015, the company introduced a Pan-American cross-border unlimited voice and text-messaging service for new and existing subscribers of the post-paid plans 'AT&T Unidos' and 'AT&T Unidos Prepago' at no additional cost. (Read more: AT&T's 4G LTE Network Expansion Plans on Track in Mexico)
4. Frontier Communications continues to be significantly challenged by slow economic recovery in its service territories and the loss of legacy fixed telephony business to wireless and other offerings. The persistent decline in access lines continues to tighten local service revenues, which accounts for most of Frontier Communications’ overall revenues. (Read more: Frontier Communications Faces Downgrade in Credit Ratings)
5. According to data compiled by LRG, 14 prime cable TV and telecom operators jointly had approximately 93.9 million high-speed Internet subscribers at the end of the first quarter of 2017, representing more than 95% of the nation’s total broadband market. Of the count cited, cable MSOs commanded nearly 59.35 million subscribers (63.2%) while the remaining 34.55 million customers (36.8%) were serviced by telecom operators. (Read more: Cable MSOs Maintain Lead in High-Speed Broadband Market)
Price Performance
The following table shows the price movement of major telecom players over the past week and last six months.
Company
Last Week
Last 6 Months
VZ
0.63%
-11.11%
T
1.57%
-2.70%
S
10.76%
3.55%
TMUS
6.52%
24.36%
CHTR
-0.35%
19.43%
TEF
2.10%
34.13%
AMX
4.93%
38.31%
CMCSA
5.19%
16.63%
DISH
0.64%
13.23%
In the last five trading sessions, share price movement of most of major telecom stocks was positive barring Charter Communications. Sprint (10.76%), T-Mobile US (6.52%), Comcast (5.19%) and America Movil (4.93%) gained substantially in the same time period.
Similarly, in the last six months, the price performances of most of the major telecom stocks were positive. Among the stocks that gained substantially are America Movil (38.31%), Telefonica (34.13%), T-Mobile US (24.36%), Charter Communications (19.43%), Comcast (16.63%) and DISH Network (13.23%).
What’s Next in the Telecom Space?
We do not expect any significant change in the telecom industry or in the overall global economic factors that might affect the industry in the coming week. Therefore, we expect stocks to trade in line with the broader market movement at least in the near-term.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>