The U.S. telecom stocks witnessed a relatively flat trajectory in the past week as latent geopolitical tensions continued to take the steam out of the sector’s growth engine. The Trump administration maintained pressure for the proposed sale of TikTok by mid-September to avoid a ban on its U.S. operations. The concerted efforts appear to be a strategic ploy to accelerate technology decoupling with China and encourage domestic firms to reorganize their global production network away from the communist nation.
However, a recent FCC report revealed that rural U.S. telecom operators that relied on cheaper telecommunications equipment from Huawei and ZTE would require an estimated $1.8 billion to replace them. The FCC urged the Congress to approve adequate funding to help these firms remove and replace the untrustworthy equipment at the earliest and has reportedly shortlisted about 50 such companies that are eligible to seek reimbursements. In order to bridge the digital divide, firms like Cisco are increasingly coming up with networking solutions that are particularly developed to cater to the rural markets.
Amid this cacophony, the proposed sale of TikTok’s U.S. operations remains mired in a geopolitical battle of supremacy as it remains to be seen how the ownership of the business would change hands. The uncertain business environment perhaps made the balancing act of the industry all the more difficult as it continued to tread on a tightrope fraught with several pitfalls, likely inducing a relatively flat growth trajectory.
Regarding company-specific news, divestment talks, product launches, collaborations and acquisitions took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Verizon Communications Inc. (VZ - Free Report) has offered a $6.6 billion worth contract to Samsung Electronics to provide communication equipment for its wireless network. Although the finer details are yet to be revealed, the deal is reportedly one of the biggest of its kind secured by the South Korean firm in the next-generation 5G network market.
With Huawei losing ground due to various trade restrictions imposed by the Trump administration, and Nordic firms Nokia Corporation and Ericsson gaining precedence, the contract win assumes great significance for Samsung. The deal is likely to strengthen its presence in the global total telecom equipment market and could make way for similar deals in the near future. In addition, it is likely to give Samsung a leverage to better negotiate with other countries for high-quality 5G network equipment and realign the segment at the expense of its Chinese counterpart.
2. Ericsson (ERIC - Free Report) recently announced that its 5G Radio Access Network and Core products and solutions are driving Orange Spain’s 5G services in Madrid and Barcelona. This follows the service provider’s nationwide commercial 5G launch on Sep 7.
Importantly, the 5G deployment builds on more than 20 years of partnership between Ericsson and Orange Spain. The initial 5G deployments in Madrid and Barcelona will be followed by other locations under a four-year partnership to help Orange Spain develop its 5G offering across Spain. Operating on a 3.6GHz spectrum, the 5G network in Madrid and Barcelona is powered by the Ericsson Radio System.
3. Nokia Corporation (NOK - Free Report) has announced that the State Grid Corporation of China (“SGCC”), the world’s largest utility company, will set up a programmable optical network using Nokia’s IP/Optical solutions.
SGCC provides electrical power to more than 1.1 billion people across 26 provinces, covering 88% of China’s national territory. The company is modernizing its communications infrastructure to meet the increased demand for transferring huge amounts of data across long distances. The latest move will enable SGCC to expand its network coverage to more power stations and offices while increasing capacity.
4. ADTRAN, Inc. (ADTN - Free Report) has expanded its fixed wireless services portfolio with the addition of ADTRAN MetNet 60GHz high-powered version 2 (HPv2) CPE. This high-powered next-gen solution is aimed at supporting small cell densification initiatives while strengthening the existing fiber network infrastructure of residential areas with best-in-capabilities of multi-gigabit services.
The ADTRAN MetNet 60GHz HPv2 CPE, which is part of ADTRAN’s fixed wireless portfolio, has been designed with the technology developed by Cambridge Communication Systems. It operates on a 90-degree phased array antenna that doubles the network coverage over legacy gigabit mesh solutions.
5. Following the success of Orbi WiFi 6 Tri-band Mesh Systems, NETGEAR, Inc. (NTGR - Free Report) announced the launch of Orbi Pro WiFi 6 (SXK80) Tri-band Mesh System. The latest entrant to the Orbi suite of networking solutions has been designed to provide consistent Wi-Fi coverage across home offices and small-sized organizations.
The product launch is likely to make the Orbi technology more accessible to a broader spectrum of audience by catering to the accretive bandwidth requirements of almost every household. The Orbi Pro Wi-Fi 6 (SXK80) Tri-band Mesh System is a multi-node mesh system, which includes one router and one satellite, and offers stable WiFi connection spanning an area of nearly 18,000 square feet.
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, none of the stocks went up, while Qualcomm was the biggest decliner with its stock falling 8%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 34.6%, while AT&T was the biggest decliner with its stock falling 17.5%.
Over the past six months, the Zacks Telecommunications Services industry has rallied 4%, while the S&P 500 has gained 24.1%.
What’s Next in the Telecom Space?
In addition to the 5G deployments and product launches, all eyes will remain glued to how the administration continues to safeguard the interests of domestic telecom firms from perceived Chinese threats and how the TikTok saga unfurls.
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