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Telecom Stock Roundup: VZ Reality Ad Launch, CBB's Merger Deal & More

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In the last five trading days, telecom stocks flattered to deceive as the initial upturn was replaced by a persistent downturn for the most part of the past week as President Trump renewed fears of a fresh trade war with China.

The on-again off-again trade war between the United States and China took a new turn when Trump imposed a fresh salvo of tariffs worth $50 billion on Chinese imports last week. This followed an immediate retaliation by China, which promised to impose 25% tariffs on 545 categories of U.S. products worth $34 billion including soyabeans, beef, whiskey and off-road vehicles. China also threatened to impose $16 billion worth of additional tariffs in subsequent stages, targeting U.S. energy exports such as coal and crude oil.

Meanwhile, the Senate dealt a body blow to Trump when it defied his decision and voted to overrule the administration’s deal with ZTE. With a unanimous majority of 85-10 votes, the Senate nullified the ZTE settlement plans, which included a $1.4 billion penalty and overhaul of its leadership among other conditions, and proposed an outright ban on the government buying products and services from it. Although Trump could use his veto powers to prevail over this decision, the contentious issue could further strain the relations between the United States and China.   
   
Regarding company-specific news, technology collaborations, acquisitions and investments for clean energy ruled the roost over the last five trading days.

Recap of the Week’s Most Important Stories

1.    According to a Bloomberg report, the South China Morning Post has claimed that regulators of China have approved Qualcomm Incorporated’s (QCOM - Free Report) $43 billion deal to acquire NXP Semiconductors N.V.

China was the only nation opposing the buyout deal on issues relating to antitrust concerns. With the likely clearance, Qualcomm has moved past the last stumbling block, having earlier received approvals from eight of the nine global regulators. (Read more: Qualcomm-NXP Deal Reportedly Gets China Regulators' Approval)

2.    Oath Inc., a subsidiary of Verizon Communications Inc. (VZ - Free Report) , introduced new opportunities for brands to engage with consumers through extended reality ad experiences, at the 2018 Cannes Lions International Festival of Creativity.

Oath’s latest premium ad innovation for consumers entails combining the art of brand building and the science of data, new 3D advertisement formats and first-in-market programmatic virtual reality ads. The company is using brand advertising intelligence to help marketers build emotional connections with their customers. (Read more: Verizon's Oath Unveils Extended Reality Ad for Marketers)

3.    Cincinnati Bell Inc. (CBB - Free Report) announced that it has received final regulatory approvals from the U.S. Federal Communications Commission to acquire Hawaiian Telcom Holdco, Inc. The transaction is now subject to the satisfaction of customary closing conditions.

Together, Cincinnati Bell and Hawaiian Telcom will be a stronger communications and technology company. The merger will boost innovation as well as build scale and fiber density across Cincinnati Bell’s footprint. (Read more: Cincinnati Bell Wins FCC Approval to Acquire Hawaiian Telcom)

4.    AT&T Inc. (T - Free Report) announced that it has signed a new power purchase agreement with NextEra Energy Resources wherein it will buy 300 megawatts of wind energy from two new wind farm projects in Wilbarger and Hardeman Counties, TX.

Apart from a low carbon environment, the $350 million dollar project also looks forward to the various positive externalities that will benefit the local community. Thousands of homes will have electricity round the year, about 1,000 construction jobs will be made available, an estimated flow of nearly $190 million in property tax revenues for local communities, and more than $167 million in lease payments to landowners will be enabled. (Read more: AT&T-NextEra Ink Deal to Invest in Wind Farm for Clean Energy)

5.    Nokia Corporation (NOK - Free Report) in collaboration with Orange has completed a live network trial in Poland, in an effort to demonstrate how the use of cloud optimized Radio Access Network (RAN) would benefit the progression to 5G. This cloud RAN trial was the first of its kind in operational LTE network in Europe to be conducted using the operator’s own cloud infrastructure.

The trial marked an important milestone in Orange’s upcoming distributed cloud architecture for 5G. The AirScale Cloud RAN of Nokia provides the flexibility as and when different requirements for 5G, IoT, low-latency services and end-to-end slicing crop up. (Read more: Nokia, Orange Gear Up for 5G With Cloud RAN Trial)

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 increasing 2%. Harris Corporation (HRS - Free Report) was the major decliner with its stock losing 4.8%.

Over the last six months, Motorola was the best performer with its stock appreciating 21.7% while AT&T declined the most with its shares falling 21.7%.

Over the last six months, the Zacks Telecommunications Services industry has underperformed the benchmark S&P 500 Index with a decline of 12% against a rise of 3.3% 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 Trump, the Senate and the House of Representatives resolve the ZTE issue.

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