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Telecom Stock Roundup: Verizon 5G Internet Service, Ericsson-T-Mobile 5G Deal & More

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In the past five trading days, the uptrend in telecom stocks continued driven by healthy job growth data exhibiting signs of a strengthening economy. The stocks were also fueled by optimism from a U.S. proposal to initiate talks with China in the near future to iron out the trade-related differences between the two countries.

Per the U.S. Labor Department report, about 201,000 new jobs were created in August, marking the 95th straight month of employment gains in the country. The unemployment rate was steady at 3.9% and was in close proximity to its 18-year low tally. The annual wage rate in the economy jumped from 2.7% to 2.9% in August, recording its fastest growth since the Great Recession in 2009. The statistics depicted a bustling American economy that is weathering the doldrums caused by escalating trade tension between the Republican administration and other countries, including China.

Toward this end, the U.S. Treasury Secretary Steven Mnuchin has reportedly invited China for high-level trade-related talks. The outreach sparks fresh hopes of getting the bilateral trade negotiations back on track. The on-again off-again trade talks were derailed earlier as President Trump threatened to impose tariffs on an additional $267 billion of goods, on top of the tariffs already proposed on $200 billion worth of imports from China.
             
Regarding company-specific news, strategic deals, technological collaborations and deployment of 5G technology took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    Verizon Communications Inc. (VZ - Free Report) has announced its plans to launch the world’s first commercial 5G broadband Internet service in select markets on Oct 1, 2018. This is the company’s giant leap forward in gaining a competitive advantage against rivals.

Dubbed Verizon 5G Home, the service will be initially available in select regions in Houston, Indianapolis, Los Angeles and Sacramento. Existing Verizon customers in these places would get an opportunity to avail the service by paying $50 a month for the 5G Internet and TV service after a three-month free trial. Other customers will be required to pay $70 a month for the service after the introductory free trial period of three months. (Read more: Verizon to Launch 5G Internet & TV Service in October)

2.    ARRIS International plc (ARRS - Free Report) announced that two of its products will power the next-generation satellite distribution network of HBO Latin America. This will facilitate the smooth transfer of video content across the ARRIS’s cable network in the region.

These include the ARRIS DSR-7412 transcoder, which enables transcoding to make the digital file viewable on different playback devices, and DSR-4470 receiver decoder that helps to capture and convert digital data transmitted from a radio-frequency signal. ARRIS is transforming the entertainment experience through a holistic approach to content delivery, leveraging its expertise in cloud, network and home, to help providers anticipate demand for more personalized, relevant and mobile experiences. (Read more: ARRIS Products to Boost HBO Latin America Content Delivery)

3.    AT&T Inc. (T - Free Report) announced that as part of its 5G deployment in a dozen cities in 2018, it will launch mobile 5G service in certain areas of five cities — Houston, Jacksonville, Louisville, New Orleans and San Antonio — this year. These add to its previously announced seven cities of Atlanta, Charlotte, Dallas, Indianapolis, Oklahoma City, Raleigh and Waco.

The U.S. telco giant added that it is planning to bring mobile 5G service in parts of Las Vegas, Los Angeles, Nashville, Orlando, San Diego, San Francisco and San Jose in early 2019 to take the tally to 19 cities and will expand thereafter. (Read more: AT&T to Introduce Mobile 5G Service in 5 Cities in 2018)

4.    Finisar Corporation (FNSR - Free Report) reported robust first-quarter fiscal 2019 results (ended Jul 29, 2018), wherein both the top and bottom lines beat the respective Zacks Consensus Estimate.

Excluding non-recurring items, non-GAAP net income declined to $21.3 million or 18 cents per share from $45.8 million or 40 cents per share in the prior-year quarter. Non-GAAP earnings per share beat the Zacks Consensus Estimate by 6 cents. Quarterly overall revenues decreased 7.2% year over year to $317.3 million primarily owing to lower datacom revenues. The top line, however, surpassed the Zacks Consensus Estimate of $316 million. (Read more: Finisar Surpasses Q1 Earnings and Revenue Estimates)

5.    Ericsson (ERIC - Free Report) announced that it has inked a $3.5 billion multi-year deal with T-Mobile US, Inc. (TMUS - Free Report) to support the latter’s nationwide 5G network deployment. Per the agreement, the Swedish high-end equipment manufacturer will provide the U.S. mobile carrier with the latest 5G New Radio (“NR”) hardware and software, compliant with 3rd Generation Partnership Project standards.

Notably, T-Mobile’s installed base of Ericsson Radio System radios will be able to run 5G NR technology with simple remote software installation. The agreement entails Ericsson's digital services solutions including dynamic orchestration, business support systems and Ericsson Cloud Core. As a result, this will help T-Mobile to bring innovative and groundbreaking 5G experiences to customers at a rapid pace. (Read more: Ericsson Inks $3.5B Deal With T-Mobile for 5G Deployment)

Price Performance

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, AT&T was the major gainer with the company’s share price increasing 4.2%. Juniper Networks, Inc. (JNPR - Free Report) was the major decliner with its stock losing 1.6%.

Over the past six months, Sprint Corporation (S - Free Report) was the best performer with its stock appreciating 16.5% while AT&T declined the most with its shares falling 10.8%.

Over the past six months, the Zacks Telecommunications Services industry has declined 0.7% while the benchmark S&P 500 Index has gained 5%.



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 China responds to the U.S. outreach for trade talks and the outcome of trade-related talks with Canada.

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