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Over the past five trading days, U.S. telecom stocks have witnessed a roller-coaster ride, punctuated by the uncertainty regarding the final passage of the $1.2 trillion infrastructure bill by the House and a transatlantic pledge to strengthen semiconductor supply chains to tackle chip shortage. Although Democratic Speaker Nancy Pelosi has scheduled the bill for a vote today, it appears to be still stuck in a potential stalemate, as several progressive Democrats want the bill to be tied to the larger $3.5 trillion budget reconciliation bill that is facing massive backlash from both Republicans and Democrats. Despite interventions by President Biden to broker a compromise with the dissident groups, the bill appears poised on a tender balance to pass through the House. The infusion of federal funds to improve broadband infrastructure for greater access and deeper penetration in the underserved domestic markets could have worked wonders for the beleaguered industry and helped to bridge the digital divide. However, the uncertainty over the much sought-after infrastructure bill that focuses on affordability and low-cost service option has hard hit the industry.
While the policy paralysis has crippled operations, an FCC-mandate to ‘rip and replace’ telecommunications equipment manufactured by China-based firms like Huawei and ZTE has affected the sustainability of rural telecom firms amid widespread resentment of the release of Huawei's chief financial officer Meng Wanzhou from three-year detention in Canada. The removal of the low-cost gear is likely to affect rural network service, hurt profitability and jeopardize the progress of 5G deployment when most local operators would be forced to reshuffle their existing infrastructure. Although the FCC is slated to initiate a $1.9 billion program to reimburse the carriers by seeking applications from Oct 29 through Jan 14, 2022, it is unlikely to pacify the huge number of rural telecom operators that are likely to go out of office.
Meanwhile, senior cabinet officials from both the United States and the European Union have come together to coordinate transatlantic ties to better address supply chain headwinds for chip shortage and take a pro-active and unified approach against foreign adversaries. With the launch of the U.S.-EU Trade and Technology Council, the continents aim to strengthen the regional technology ecosystem by pledging to cooperate on export controls for sensitive dual-use technologies and on the development of AI. Although this appeared to be a positive signal for the industry, unless the tangible effects percolate within the system, it is unlikely to reap significant benefits.
Regarding company-specific news, partnership, strategic agreements, portfolio enhancements, and 5G deals primarily took the center stage over the past five trading days.
A surge in demand for broadband connectivity has led to a wide proliferation of fiber infrastructure throughout the country and carriers like AT&T are aiming to significantly increase their fiber coverage to gain a greater pie in the market. An integrated fiber expansion strategy is expected to improve AT&T’s broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience. The carrier intends to achieve this objective by leveraging its long-term business association with Corning spanning over three decades and gain a competitive edge in the fiber industry, which is probably in the early stages of a major growth cycle.
2. To better utilize the benefits of 5G and edge computing facilities in core network functions, Telefónica, S.A. (TEF - Free Report) recently inked a multi-year agreement with cloud-service provider Oracle Corporation to migrate most of its database systems to the cloud. The deal is the second of its kind this month with Telefonica forging an agreement with IBM to develop its first-ever Unica Next cloud-based 5G core network platform using IBM intelligent automation software and services.
Per the Oracle deal, the Spain-based carrier will transfer all its internal and commercial operations data, including business intelligence services and billing, revenues, and customer management products to the cloud-based platform in tune with the evolving business conditions. It will be operated by Oracle in Telefonica’s datacenters to comply with European data laws. Moreover, this is likely to safeguard data security issues while keeping operating costs down as Telefonica has a debt-laden balance sheet.
3. Verizon Communications Inc. (VZ - Free Report) has upgraded some of the features of its subsidiary BlueJeans that offers an interoperable cloud-based video conferencing service across a wide range of devices and conferencing platforms. The move is aimed to facilitate a seamless transition to a hybrid workplace with a spontaneous and engaging interactive digital platform as the work-from-home option continues to gain traction.
Such technological innovations are likely to provide flexibility to remote workers and unlock workplace productivity and happiness. By creating a virtual space that simulates a real-life office environment where distributed teams can collate together to brainstorm, organize and socialize, BlueJeans aims to address a major hurdle in today’s hybrid work reality.
4. Nokia Corporation (NOK - Free Report) has partnered with Slovenia-based telecommunications company — Telekom Slovenije — to power the latter’s fiber-to-the-home (FTTH) network with the deployment of avant-garde broadband equipment. Per the agreement, Telekom Slovenije will also capitalize on the Quillion chipset-powered Nokia ISAM FX series. The ISAM FX series involve high-capacity access nodes that have been specifically designed to deliver ultra-broadband services rapidly and cost-effectively.
The deployment, which is scheduled to commence this year, will bring 10Gb/s fiber to Slovenia. Currently, the FTTH network caters to more than half of Slovenian households. The 10Gb/s fiber installation will enable these households to benefit from high-speed broadband connections.
5. Ericsson (ERIC - Free Report) has inked a 10-year 5G partnership deal with Digital Nasional Berhad (“DNB”) to deliver a nationwide 5G network in Malaysia. DNB is helping Malaysia to achieve its digital goals as outlined in the government’s MyDIGITAL blueprint, which plans to transform Malaysia into a digitally-driven, high-income country.
DNB’s partnership with Ericsson covers the latter’s Radio System products and solutions, including Spectrum Sharing, cloud-native 5G Core, and 5G Radio Access Network. The Sweden-based telecom gear maker will supply its Managed Services offering, Ericsson Operations Engine. It will also provide operational support systems and business support systems solutions.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and six months.
Image Source: Zacks Investment Research
In the past five trading days, Juniper has been the best performer with its stock gaining 2.1% while Bandwidth has declined the most with its stock falling 12.7%.
Over the past six months, Motorola has been the best performer with its stock appreciating 20.2% while Bandwidth has declined the most with its stock falling 44.3%.
Over the past six months, the Zacks Telecommunications Services industry has gained 4.4% and the S&P 500 has rallied 10.5%.
Image Source: Zacks Investment Research
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued to how the administration implements key policy changes to safeguard the interests of the industry and address the bottlenecks to spur growth.
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Telecom Stock Roundup: Corning Boosts Fiber Production, Telefonica Inks Deal & More
Over the past five trading days, U.S. telecom stocks have witnessed a roller-coaster ride, punctuated by the uncertainty regarding the final passage of the $1.2 trillion infrastructure bill by the House and a transatlantic pledge to strengthen semiconductor supply chains to tackle chip shortage. Although Democratic Speaker Nancy Pelosi has scheduled the bill for a vote today, it appears to be still stuck in a potential stalemate, as several progressive Democrats want the bill to be tied to the larger $3.5 trillion budget reconciliation bill that is facing massive backlash from both Republicans and Democrats. Despite interventions by President Biden to broker a compromise with the dissident groups, the bill appears poised on a tender balance to pass through the House. The infusion of federal funds to improve broadband infrastructure for greater access and deeper penetration in the underserved domestic markets could have worked wonders for the beleaguered industry and helped to bridge the digital divide. However, the uncertainty over the much sought-after infrastructure bill that focuses on affordability and low-cost service option has hard hit the industry.
While the policy paralysis has crippled operations, an FCC-mandate to ‘rip and replace’ telecommunications equipment manufactured by China-based firms like Huawei and ZTE has affected the sustainability of rural telecom firms amid widespread resentment of the release of Huawei's chief financial officer Meng Wanzhou from three-year detention in Canada. The removal of the low-cost gear is likely to affect rural network service, hurt profitability and jeopardize the progress of 5G deployment when most local operators would be forced to reshuffle their existing infrastructure. Although the FCC is slated to initiate a $1.9 billion program to reimburse the carriers by seeking applications from Oct 29 through Jan 14, 2022, it is unlikely to pacify the huge number of rural telecom operators that are likely to go out of office.
Meanwhile, senior cabinet officials from both the United States and the European Union have come together to coordinate transatlantic ties to better address supply chain headwinds for chip shortage and take a pro-active and unified approach against foreign adversaries. With the launch of the U.S.-EU Trade and Technology Council, the continents aim to strengthen the regional technology ecosystem by pledging to cooperate on export controls for sensitive dual-use technologies and on the development of AI. Although this appeared to be a positive signal for the industry, unless the tangible effects percolate within the system, it is unlikely to reap significant benefits.
Regarding company-specific news, partnership, strategic agreements, portfolio enhancements, and 5G deals primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Corning Incorporated (GLW - Free Report) has extended its long-term partnership with AT&T Inc. (T - Free Report) by committing to invest $150 million in its Catawba County facility in North Carolina to augment fiber production. In addition to generating about 200 jobs initially to boost regional economic development, the investment is likely to help AT&T increase its fiber footprint across the country and scale up its broadband network connectivity.
A surge in demand for broadband connectivity has led to a wide proliferation of fiber infrastructure throughout the country and carriers like AT&T are aiming to significantly increase their fiber coverage to gain a greater pie in the market. An integrated fiber expansion strategy is expected to improve AT&T’s broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience. The carrier intends to achieve this objective by leveraging its long-term business association with Corning spanning over three decades and gain a competitive edge in the fiber industry, which is probably in the early stages of a major growth cycle.
2. To better utilize the benefits of 5G and edge computing facilities in core network functions, Telefónica, S.A. (TEF - Free Report) recently inked a multi-year agreement with cloud-service provider Oracle Corporation to migrate most of its database systems to the cloud. The deal is the second of its kind this month with Telefonica forging an agreement with IBM to develop its first-ever Unica Next cloud-based 5G core network platform using IBM intelligent automation software and services.
Per the Oracle deal, the Spain-based carrier will transfer all its internal and commercial operations data, including business intelligence services and billing, revenues, and customer management products to the cloud-based platform in tune with the evolving business conditions. It will be operated by Oracle in Telefonica’s datacenters to comply with European data laws. Moreover, this is likely to safeguard data security issues while keeping operating costs down as Telefonica has a debt-laden balance sheet.
3. Verizon Communications Inc. (VZ - Free Report) has upgraded some of the features of its subsidiary BlueJeans that offers an interoperable cloud-based video conferencing service across a wide range of devices and conferencing platforms. The move is aimed to facilitate a seamless transition to a hybrid workplace with a spontaneous and engaging interactive digital platform as the work-from-home option continues to gain traction.
Such technological innovations are likely to provide flexibility to remote workers and unlock workplace productivity and happiness. By creating a virtual space that simulates a real-life office environment where distributed teams can collate together to brainstorm, organize and socialize, BlueJeans aims to address a major hurdle in today’s hybrid work reality.
4. Nokia Corporation (NOK - Free Report) has partnered with Slovenia-based telecommunications company — Telekom Slovenije — to power the latter’s fiber-to-the-home (FTTH) network with the deployment of avant-garde broadband equipment. Per the agreement, Telekom Slovenije will also capitalize on the Quillion chipset-powered Nokia ISAM FX series. The ISAM FX series involve high-capacity access nodes that have been specifically designed to deliver ultra-broadband services rapidly and cost-effectively.
The deployment, which is scheduled to commence this year, will bring 10Gb/s fiber to Slovenia. Currently, the FTTH network caters to more than half of Slovenian households. The 10Gb/s fiber installation will enable these households to benefit from high-speed broadband connections.
5. Ericsson (ERIC - Free Report) has inked a 10-year 5G partnership deal with Digital Nasional Berhad (“DNB”) to deliver a nationwide 5G network in Malaysia. DNB is helping Malaysia to achieve its digital goals as outlined in the government’s MyDIGITAL blueprint, which plans to transform Malaysia into a digitally-driven, high-income country.
DNB’s partnership with Ericsson covers the latter’s Radio System products and solutions, including Spectrum Sharing, cloud-native 5G Core, and 5G Radio Access Network. The Sweden-based telecom gear maker will supply its Managed Services offering, Ericsson Operations Engine. It will also provide operational support systems and business support systems solutions.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and six months.
In the past five trading days, Juniper has been the best performer with its stock gaining 2.1% while Bandwidth has declined the most with its stock falling 12.7%.
Over the past six months, Motorola has been the best performer with its stock appreciating 20.2% while Bandwidth has declined the most with its stock falling 44.3%.
Over the past six months, the Zacks Telecommunications Services industry has gained 4.4% and the S&P 500 has rallied 10.5%.
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued to how the administration implements key policy changes to safeguard the interests of the industry and address the bottlenecks to spur growth.