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Telecom Stock Roundup: AT&T Enters Video Gaming, ARRIS-Google Team Up & More

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In the last five trading days, telecom stocks declined initially but gradually picked up pace as U.S.-China trade talks offered some hope of averting a trade war as the Trump administration reportedly gave the finishing touches on a deal with ZTE.

Last week, as the ZTE settlement appeared to be on the horizon, another Chinese telecom firm Huawei filed its response to the FCC (Federal Communications Commission) in a strong rebuttal, denying allegations of being a U.S. security threat. Accusing FCC of being prejudiced due to the location of its domiciled headquarters, Huawei contested the decision of banning it from accessing the $8.5 billion Universal Service Fund (“USF”), which is a key source of funds for the rollout of 5G and gigabit broadband projects in the United States. The beleaguered firm also found support in industry trade group CTIA, which argued that the industry was equipped with effective security and design networks to be safe and reliable, and restricting the access to USF would only hinder competition and harm customers.

Amid these conundrums, the National Telecommunications and Information Administration (“NTIA”), a division of the U.S. Department of Commerce, vouched its support for start-up firms to integrate blockchain technology into their systems. The agency also released a ‘notice of enquiry’ to solicit ideas relating to emerging technologies, cybersecurity and privacy, internet governance and information free-flow. The collated information is likely to be used as a guideline by NTIA’s international Internet policy to create regulations for various sectors.

Regarding company-specific news, new business ventures, improved product launches for superior connectivity and high-quality content to subscribers at lower cost of ownership, and technology collaborations ruled the roost over the last five trading days.

Recap of the Week’s Most Important Stories

1.    AT&T (T - Free Report) has ventured into the competitive video-gaming arena by collaborating with ESL, the largest esports powerhouse in the world, to stay connected with customers.

AT&T will leverage its sports brand image to tap the huge revenue-generating potential of this emerging industry through brand promotions and on-site activations. This will help the company to actively engage with fans through superfast Wi-Fi connections and convenient charging stations, displaying the latest offerings through immersive experiences and demos. (Read more: AT&T Collaborates With ESL for Video-Gaming Venture)

2.    ARRIS International plc (ARRS - Free Report) has inked a deal with Alphabet Inc. to utilize indigenous Ruckus technology of its subsidiary Ruckus Networks to power the Google Station Wi-Fi hotspots in three emerging countries, namely India, Indonesia and Mexico.

The strategic collaboration is part of Alphabet’s broader objective to help lower the barrier to entry for network connectivity in support of Google's Next Billion Users initiative. Leveraging Ruckus' patented adaptive antenna — BeamFlex technology — for improved connectivity range, better signals and maximized power efficiency, the hotspots have emerged as high-performance Wi-Fi platform for the masses. (Read more: ARRIS' Ruckus Technology to Run Google Station Wi-Fi Hotspot)

3.    America Movil, S.A.B. de C.V. (AMX - Free Report) has decided to roll out the services of its Latin American subsidiary Claro in the United States to extend its footprint in the country. Consequently, Telmex USA, L.L.C. that operates as a subsidiary of the company in the United States will be renamed as Claro Enterprise Solutions, LLC.

Claro Enterprise Solutions will primarily focus on enterprise solutions of businesses of all sizes — from small companies to large multinationals. Based in Florida, the rechristened subsidiary will have a significant presence throughout the country. The strategic move will expand the global presence of Claro and will facilitate America Movil's objective to drive innovations and bring them to the market through integrated communication and information technology services. (Read more: America Movil to Extend Claro's Footprint in the U.S.)

4.    Ciena Corporation (CIEN - Free Report) reported mixed financial results for second-quarter fiscal 2018 (ended Apr 30, 2018).

Non-GAAP earnings were $33.8 million or 23 cents per share compared with $48.2 million or 30 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by 7 cents. Quarterly total revenues increased 3.3% year over year to $730 million, driven by continued growth in Asia Pacific service providers as well as global webscale customers. The top line surpassed the Zacks Consensus Estimate of $729 million. (Read more: Ciena's Q2 Earnings Miss Estimates, Revenues Beat)

5.    Verizon Communications Inc. (VZ - Free Report) has launched a new subscription-based Threat Intelligence Platform Service to detect and address cyber threats more effectively.

The new platform bolsters cyber security performance by identifying numerous threat indicators and locating active attacks in real-time. These active threats are evaluated by Verizon’s Professional Services consultants at the customer’s location. The analysis is based on the kind of service the customer needs so that specialists can make early threat detection and choose the best approach to combat it. (Read more: Verizon Offers Subscription-Based Service for Cyber Threat)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the last six months.



In the last five trading days, Motorola Solutions, Inc. (MSI - Free Report) was the major gainer with its share price up 3.6%. SBA Communications Corporation (SBAC - Free Report) was the major decliner with its stock losing 0.7%.

Over the last six months, Motorola was the best performer with its stock appreciating 15% while AT&T declined the most with its shares falling 10%.

Over the last six months, the Zacks Telecommunications Services industry has underperformed the benchmark S&P 500 Index with a decline of 7.1% against a gain of 4.6% for the latter.



What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to how United States and China resolve their differences to avert a trade war and reduce the former’s negative balance of trade.

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