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Telecom Stock Roundup: Qualcomm Faces Antitrust Trial, Sprint's 5G Foray & More

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In the past five trading days, telecom stocks witnessed an uptrend on cautious optimism as both the United States and China continued trade negotiations despite the undercurrents related to Huawei CFO, Meng Wanzhou. China also took certain decisive steps to ease some bottlenecks in the bilateral trade relations, as U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu are slated to conduct higher-level talks later this month.

At the beginning of the year, a comprehensive e-commerce law went into effect in China. Further, the National People’s Congress Standing Committee of China had started reviewing a draft foreign investment law. Both these laws are aimed to thwart intellectual property infringements and the forced transfer of foreign technology to Chinese companies through strict rules and regulations. The Communist nation has also lowered tariffs on U.S. cars from 40% to 15% for three months starting from the first week of January. In addition, China has stepped up the imports of soybean and has reportedly ordered more than 5 million tons of U.S. soybeans since December, while approving five genetically-modified crops for import.

Meanwhile, incriminating documents related to the suspected ties of Huawei with two obscure companies, using which Meng allegedly deceived international banks into clearing transactions (worth millions of dollars) with Iran despite economic sanctions, had put the spotlight back on the extradition case. Although Huawei has maintained that equipment seller Skycom and shell company Canicula Holdings are independent entities, documents reveal that Huawei controlled both of them. While a high-level Huawei executive was reportedly Skycom's Iran manager, at least three Chinese-named individuals had signing rights for both Huawei and Skycom bank accounts in Iran. Furthermore, the documents reveal that Huawei conducted operations in Syria through Canicula. It remains to be seen how the trial pans out with these revelations and whether it derails the negotiation process.

Regarding company-specific news, acquisitions, deployment of 5G services, technology collaborations and strategic corporate actions took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    Motorola Solutions, Inc. (MSI - Free Report) has acquired VaaS International Holdings, Inc., a data and image analytics firm, for $445 million in a combination of cash and equity. The transaction will expand Motorola’s footprint in the command center software portfolio with the largest shareable database of vehicle location information.

The acquired firm, with projected revenues of approximately $100 million in 2019, will form an integral part of Motorola’s Services and Software segment. Over the years, Motorola has expanded its services installed base and is building an end-to-end public safety command center platform. Management expects this segment to grow at a faster rate than the other and drive meaningful operating margin expansion in 2019 and beyond. (Read more: Motorola Buys VaaS, Boosts Command Center Software Portfolio)

2.    It appears that there is no respite for QUALCOMM Incorporated (QCOM - Free Report) from legal battles related to its businesses. After a prolonged courtroom saga with Apple Inc. for patent infringement issues, Qualcomm is now bracing itself for the U.S. Federal Trade Commission's antitrust case for monopolistic trade practices. The California courtroom trial is likely to have a cascading effect on the smartphone industry across the globe and has attracted massive interest from all stakeholders, including Apple.

In its appeal before the U.S. District Judge Lucy Koh, the government pleaded that Qualcomm used anti-competitive policies to drive sales of its smartphone chips. It alleged that Qualcomm followed “no license, no chips” trade policy, under which chips were only sold to those manufacturers that agreed to inflated patent licensing terms. The government agency further accused Qualcomm of using unfair trade practices and allegedly offering financial rebates to the iPhone maker for buying chips only from it, undermining competitive offers from rival Intel Corporation. (Read more: Qualcomm Braces for Legal Battle with US Antitrust Regulator)

3.    Joining the 5G bandwagon, Sprint Corporation (S - Free Report) has announced plans to launch commercial 5G smartphones in the market in first-half 2019 in collaboration with electronics firm Samsung. This is reportedly the third device unveiled by Sprint for its 5G network.

The latest 5G Samsung smartphone to be launched by Sprint will offer dual-mode connectivity to both its LTE and 5G network supporting 2.5 GHz spectrum. For roaming facilities, the handset will support Sprint's 1.9 GHz spectrum (band 25), 800 MHz spectrum (band 26) and other LTE spectrum bands. (Read more: Sprint Joins 5G Smartphone Bandwagon With Samsung Mobile)

4.    Backed by ‘out-of-the-box’ thinking, AT&T Inc. (T - Free Report) has evolved over the years from a telecom firm to a leading player in the U.S. communications sector with significant media assets. The company now aims to leverage the inherent potential of its advertising unit Xandr and WarnerMedia’s Turner business to offer enriching advertising content and data analysis to customers in 2019.

The two business entities have now collaborated to improve the relevancy of advertising by pooling a unique set of assets — valuable consumer data and insights, advanced advertising capabilities and engaged passionate fanbases. (Read more: AT&T to Offer Enriching Ads With Xandr-Turner Collaboration)

5.    ARRIS International plc recently unveiled its SURFboard mAX Pro Mesh Wi-Fi System to enable consumers to better experience Gigabit Wi-Fi in every connected device throughout their homes. Notably, the system entails Gigabit service along with strong coverage by combining networking technologies such as Tri-band, Wi-Fi 6, 4x4 and Mesh to provide seamless connectivity.

With this state-of-the art product, ARRIS aims to meet the growing demand for Gigabit and multi-Gigabit connectivity as consumers now seek high-speed Internet for all rooms in the house. The early availability of Wi-Fi 6 and mesh systems also offers a competitive edge to ARRIS in its continued efforts to reach a high-end market segment. (Read more: ARRIS Offers Wi-Fi 6 Mesh System for Better Home Connectivity)

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, Juniper Networks, Inc. (JNPR - Free Report) was the biggest gainer with its share price increasing 4.5%, while Qualcomm was the only decliner with its stock losing 1.4%.

Over the past six months, Sprint has been the best performer with its stock appreciating 12.1%, while Harris Corporation declined the most with its shares falling 8.6%.

Over the past six months, the Zacks Telecommunications Services industry has inched up 0.6% while the S&P 500 fell 6.9%.

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 the United States and China continue their negotiations for a long-term solution to the trade war.

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