In the past five trading days, telecom stocks witnessed a gradual uptrend as positive economic sentiments catapulted most of the U.S. equity market to record highs. The Fed also remained upbeat about the economy and hinted at possible rate hikes with solid labor market conditions and inflation levels near the 2% mark. In addition to the overall favorable outlook, the telecom stocks swam with the tide of optimism as investors expected a thaw in the trade skirmishes between the United States and China with some official communication likely this week. However, the stocks declined slightly by the end of the week as fresh tariffs were ready to come into effect.
Close on the heels of a solid earnings season, the equity markets continued one of the longest bull runs in the history with healthy GDP growth, rising wages, record unemployment, rising consumer confidence, higher infrastructure spending and surging corporate profits owing to tax cuts all contributing to the feel-good-factor. The telecom stocks further benefited from the continued deployment of 5G technology that is likely to be the backbone of the digitized world in the future.
The markets were also enthused by the impending trade-related talks of vice commerce minister of China Wang Shouwen with his counterparts in the United States — the first official exchange in two months — that showed signs of possible patch up of the trade hostilities between the nations. Although, President Trump gave a go-ahead to the imposition of 25% tariff on $16 billion worth of imported products from China from Aug 23 with the latter likely to retaliate in the same coin, expectations of a favorable outcome for the trade impasse have kept the stocks rolling up.
Regarding company-specific news, strategic deals, technological collaborations and deployment of 5G technology took the center stage over the last five trading days.
Recap of the Week’s Most Important Stories
1. AT&T Inc. (T - Free Report) completed the acquisition of AppNexus, a technology firm that operates the world’s largest independent marketplace for digital advertising. The transaction is likely to augment AT&T’s foothold in the digital ad sales market and enable it to better compete with its rivals.
With more than 34,000 publishers and 177,000 brands transacting in the marketplace, AppNexus allows advertisers to buy space across thousands of websites, targeting their desired audience. It helps publishers to manage ad space on their sites as well as aids ad agencies to purchase various ads. The transaction, valued at around $1.6 billion, is therefore expected to place AT&T deeper into the digital ad realm. (Read more: AT&T Closes AppNexus Buyout to Go Deep Into Digital Ad Realm)
2. Nokia Corporation (NOK - Free Report) announced that its cloud-native core technology is being deployed in Delhi by Idea Cellular, an Indian mobile network operator.
Nokia’s AirGile cloud-native core network will provide Idea the flexibility and adaptability required to deliver high-quality performance and low latency demanded by the 5G programmable world. The AirGile solution is based on modular software architecture built with cloud technologies for improved cloud redundancy and software overload protection. This will help Idea to address the growing demand for data and voice services on a common cloud platform. (Read more: Nokia's Cloud-Native Core Technology to be Deployed in India)
3. Ericsson (ERIC - Free Report) announced that it has partnered with Hi3G to modernize the latter’s transport network in Denmark with 5G-ready routers over the next three years. Hi3G, which operates as 3 in Denmark, is a Scandinavian communications service provider.
The pact involves deployment of Ericsson’s Router 6000 hardware, software and customer support. Notably, Router 6000 series addresses the end-to-end network security concerns and demand for higher operational efficacy. This advanced radio integrated transport, along with Service Provider Software Defined Network functionality and Ericsson Network Manager, enables app-based traffic management with plug-and-play installation. (Read more: Ericsson to Modernize Hi3G's Transport Network in Denmark)
4. Verizon Communications Inc. (VZ - Free Report) announced that Indianapolis will be the fourth city to receive 5G residential broadband service, under its 2018 5G residential broadband deployment plan. With this announcement, Indianapolis joins Houston, Los Angeles and Sacramento as the first cities in the United States to receive 5G service.
The launch will make Verizon the first wireless technology services provider to deploy 5G residential broadband service and 5G mobile service in the United States. Notably, the company will roll out the 5G residential broadband service in the second half of this year. Also, it is set to offer 5G mobile service, as the mobile devices are likely to be available in early next year. (Read more: Verizon to Deploy 5G Broadband Service in Indianapolis)
5. BCE Inc. (BCE - Free Report) announced that its wholly-owned subsidiary, Bell Canada, has increased its Fibe Internet access speed to 1.5 Gbps, the fastest access speed to the households in Canada.
At present, the unlimited Fibe 1.5 Gbps service is available in Ontario and the company plans to launch the service in Québec, the Atlantic provinces and Manitoba. Supported by the company’s fibre to the premises network, the enhanced internet service is capable of providing download speeds of up to 1.5 Gbps and uploads of up to 940 Mbps. (Read more: BCE Unit Increases Fibe Internet Speed to 1.5 Gbps in Canada)
The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.
In the past five trading days, Juniper Networks, Inc. (JNPR - Free Report) was the major gainer with the share price increasing 5%. SBA Communications Corporation (SBAC - Free Report) was the major decliner with its stock losing 0.6%.
Over the past six months, Motorola Solutions, Inc. (MSI - Free Report) was the best performer with its stock appreciating 14.1% while AT&T declined the most with its shares falling 14.6%.
Over the past six months, the Zacks Telecommunications Services industry has recorded an average fall of 3.1% while the benchmark S&P 500 Index has gained 3%.
What’s Next in the Telecom Space?
In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the outcome of trade-related talks and how the telecom sector braces itself for the impact of the trade war.
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