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Telecom Stock Roundup: AT&T-Time Warner Merger, T-Mobile-Nokia 5G Tests & More

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In the last five trading days, telecom stocks declined initially but made a steady ascent on some radical policy decisions and game-changing merger news that is likely to redefine the sector dynamics.

Last week, the ZTE settlement plans, which included a $1 billion fine and overhaul of its leadership among other conditions, were made public. The strategic move gave a lifeline to the beleaguered firm of China that depended on the supply of several components from U.S. companies to manufacture products. However, the seven-year ban on the company’s products that threatened its survival and crippled operations is yet to be lifted until it pays the fine and places $400 million more in escrow in a U.S.-approved bank.

Meanwhile, the FCC (Federal Communications Commission) is striving to free up spectrum for the 5G launch of domestic telecom companies and is mulling to utilize the C-band satellite spectrum, specifically a 500 MHz swath from 3.7 to 4.2 GHz that satellite operators use. Intelsat and SES — two U.S. operators that own more than 90% of this spectrum — have together pledged to yield 100 MHz of the band for 5G use in exchange for appropriate compensation by mobile network operators. The FCC intends to vote in July on ways to open up the spectrum.

The FCC also took another major policy decision when it repealed the net neutrality rules put in place by former president Barack Obama in 2015. It argued that the decision will help Internet service providers to significantly invest in the field to boost consumer experience. Service providers are now free to block, slow down, or speed up access to some web sites on the Internet —  a preferential treatment vastly detested by net neutrality proponents.   

Regarding company-specific news, technology collaborations, acquisitions and a historic victory against the Department of Justice that paved the way for a strategic merger within the sector ruled the roost over the last five trading days.

Recap of the Week’s Most Important Stories

1.    AT&T (T - Free Report) has received green signal from the court to go ahead with its proposed deal to buy the mass media and entertainment conglomerate, Time Warner for $85 billion.

With assets like HBO, CNN and TNT, the deal will allow the power packed combination of AT&T’s data and Time Warner’s content to create new kinds of online videos and sell targeted advertisements to counter Verizon Communications Inc.’s (VZ - Free Report) Yahoo and AOL businesses. Given the scale of both AT&T and Times Warner, the merger is likely to reshape the industry dynamics, creating a media behemoth. (Read more: AT&T Wins Government Lawsuit, Seals Time Warner Merger Deal)

2.    Viasat Inc. (VSAT - Free Report) has augmented its footprint in the U.K. defense market with the acquisition of Horsebridge Defence and Security for an undisclosed amount. The transaction is likely to extend its long-term business relationship with the country’s Armed Forces and will enable it to provide superior support system for several Ministry of Defence programs in the country.

The acquisition is a strategic fit for Viasat with complementary product portfolio and cultural match. The deal will further help the company to extend commercial, military or emergency service networks to the tactical mobile edge. However, the acquisition is not expected to impact its non-GAAP earnings guidance for fiscal 2019. (Read more: Viasat Acquires Horsebridge to Extend UK Military Footprint)

3.    T-Mobile US, Inc. (TMUS - Free Report) and Nokia Corporation (NOK - Free Report) have successfully completed the nation’s first bi-directional 5G data transmission session, on a 5G New Radio system abiding by 3GPP standards. This accomplishment is a major step in incorporating 5G technologies, which will be available on smartphones next year.

5G is set to be the future of the wireless market, assuring customers of faster data speed, strong connectivity and a reliable network. The always-available, low latency connectivity of 5G networks will also pave the way for advanced technological innovations like driverless vehicles, advanced industrial automation services, medical monitoring and like. (Read more: T-Mobile and Nokia Collaborate for 5G Data Transmission Test)

4.    Ericsson (ERIC - Free Report) has collaborated with MTS, a Russian network provider, to provide high-quality mobile broadband experience to thousands of football-lovers, who are going to attend the upcoming month-long 2018 FIFA World Cup sporting extravaganza in Russia.

The strategic deal entails the largest deployment of Massive MIMO (Multiple Input, Multiple Output) across Europe to date. Football fans will be able to experience ultra-high data speeds at various public places in seven of the 11 tournament cities, without any loss in speed or quality. (Read more: Ericsson, MTS to Deploy Massive MIMO in Russia for FIFA Fans)

5.    CenturyLink, Inc. (CTL - Free Report) has joined forces with Google Cloud Partner Interconnect, which provides connectivity between on-premises network and virtual private cloud network through a supported service provider, enabling customers to connect to Google Cloud Platform globally.

With Partner Interconnect, users can now choose CenturyLink Cloud Connect Solutions to provide connectivity to Google edge point of presence. Partner Interconnect offers Google Cloud customers better connectivity choices for hybrid environments. (Read more: CenturyLink Supports Google Cloud Partner Interconnect)

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, Sprint Corporation (S - Free Report) was the major gainer with its share price increasing 2.8%. AT&T was the major decliner with its stock losing 3.6%.

Over the last six months, Motorola Solutions, Inc. (MSI - Free Report) was the best performer with its stock appreciating 18% while AT&T declined the most with its shares falling 18.7%.

Over the last six months, the Zacks Telecommunications Services industry has underperformed the benchmark S&P 500 Index with a decline of 10.6% against a rise of 3.8% 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 various advocacy groups and public litigants respond to the FCC decisions.

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