U.S. telecom stocks witnessed a roller-coaster ride over the past week as concerns regarding high consumer inflation and the fast-spreading Omicron variant were abated by a Fed decision to speed up the bond tapering process and hike interest rates thrice next year. The hawkish stance, primarily aimed to combat inflation, gave broad-based hints that the economic growth is well on track and does not require further Fed support. The pace of bond tapering would be doubled to $30 billion per month, bringing an end to the recurring asset purchases by March 2022. This would then follow three possible rate hikes to ease inflationary pressures.
The uptrend was further buoyed by a new FCC directive to small voice providers (a subscriber base of 10,000 or less) to implement STIR/SHAKEN caller ID authentication by Jun 30, 2022. The deadline was advanced by a year and was intended to preempt a disproportionate amount of illegal robocall traffic that was found to originate from small non-facilities-based providers. The stringent technology standard in IP networks is expected to be a boon for subscribers and is likely to plug the policy loopholes for the greater benefit of the industry. Notable company-specific news that grabbed the spotlight over the past week includes Ericsson’s ( ERIC Quick Quote ERIC - Free Report) deal with Vodafone Spain to set up a 5G lab and ADTRAN Inc.’s ( ADTN Quick Quote ADTN - Free Report) collaboration with local technology companies to boost rural broadband connectivity of utility firms. Also, Ciena Corporation ( CIEN Quick Quote CIEN - Free Report) reported mixed fourth-quarter fiscal 2021 results. Juniper Networks, Inc. ( JNPR Quick Quote JNPR - Free Report) is set to improve F1 Team connectivity and Nokia Corporation ( NOK Quick Quote NOK - Free Report) will power 5G network in Bangladesh. Meanwhile, the Biden administration is currently reviewing the recommendations of several federal agencies about the security of American data and the perceived threats from foreign adversities. The government is also mulling to implement strict restrictions of China-based largest chipmaker Semiconductor Manufacturing International Corp. The restrictions pertain to the export of essential raw materials to the firm. Recap of the Week’s Most Important Stories
1. Ericsson recently inked a deal for an undisclosed amount with Vodafone Spain to develop a 5G lab in the European country. The lab is likely to sow the seeds of innovation and applications for consumers and enterprises by fostering ideas and encouraging the development of co-creation space for new 5G use cases.
The Vodafone 5G lab, powered by the Ericsson Cloud Native 5G Core, will be housed at its regional headquarters in Madrid, Spain. It is expected to enhance the overall quality of 5G networks in the country and help create a solid 5G ecosystem for its holistic growth. More than 200 developers and software firms are likely to utilize the lab in its first year of operation alone and help develop new 5G use cases for diverse sectors to stimulate the macroeconomic environment. 2. Touted as a first-of-its kind partnership, ADTRAN has collaborated with KGPCo and FiberRise to offer end-to-end, utility-grade broadband solutions and differentiated services to the electric utilities. The alliance will enable nationalized entities and electric cooperatives to fast-track the funding and deployment of multigigabit fiber networks in rural areas. The alliance by ADTRAN will also enable program participants to scout for new federal funding opportunities and operate fiber broadband systems with guaranteed financial support in less than 10 months. This will help eliminate the digital divide between urban and rural areas with sustainable fiber-based connectivity. 3. Ciena reported mixed fourth-quarter fiscal 2021 (ended Oct 30, 2021) results, wherein the bottom line missed the Zacks Consensus Estimate, but the top line beat the same. Adjusted net income was $132.7 million or 85 cents per share compared with $94.5 million or 60 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by a penny. Quarterly total revenues soared 25.7% year over year to a record $1,041.5 million, well above the company’s guidance. The top line surpassed the consensus estimate of $1,031 million. Ciena secured a dozen new contracts in the reported quarter, including significant multi-year deals with two of the largest U.S. Tier 1 service providers. 4. Juniper recently inked an agreement for an undisclosed amount with Aston Martin Cognizant Formula One Team to augment the latter’s network capabilities across its new technology campus. The partnership is likely to sow the seeds for a slew of sustainable projects for a mutually beneficial long-term business relationship. Per the deal, Juniper will become the team’s official networking equipment vendor and help develop a highly automated network platform across the team’s upcoming technology campus in Northamptonshire, currently due for completion in early 2023. This, in turn, will enable the F1 team to have secure networks with a fast fault-intolerant response for all trackside operations. Juniper solutions are likely to offer a scalable, adaptive and simplified yet disruptive networking innovation for the data-sensitive requirements of Aston Martin. 5. Nokia has been selected by Teletalk Bangladesh to deploy the first 5G network in the South Asian country. The initiative aligns with the government’s digital ambitions to drive automation and Industry 4.0 in the country. The 5G network will bring faster speed and lower latency, supporting the transformation of virtually every industry. Initially, Nokia will provide equipment from its ReefShark System on Chip-powered AirScale equipment portfolio. It will also supply its high-performance 64TRX AirScale massive MIMO Adaptive Antennas to cover all deployment settings. 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, Arista gained the most with its stock rising 9.5%, while Bandwidth has declined the most, with its stock falling 8.7%.
Over the past six months, Arista has been the best performer, with its stock appreciating 33.7% while Bandwidth has declined the most, with its stock falling 87.3%. Over the past six months, the Zacks Telecommunications Services industry has declined 15.2% while the S&P 500 has rallied 9.8%. 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 industry’s interests and address the bottlenecks to spur growth.