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Telecom Stock Roundup: Qualcomm Wins Legal Stay, Sprint's 5G Expansion & More

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In the past five trading days, telecom stocks witnessed a roller-coaster ride as President Trump flip-flopped on the trade war. After maintaining his usual tirade against the unfair trade practices by the China, Trump suddenly appeared intent to strike a deal, following reportedly similar interests from the communist nation. The on-again-off-again trade war skirmishes sent confusing signals to the market that bore the brunt of the geopolitical crisis and its cascading effect on bilateral trade.

The U.S. government had earlier allowed domestic firms to continue trade with Chinese telecom equipment manufacturer Huawei for 90 days. The strategic move harbored hopes of a progress in bilateral trade negotiations that went on a tailspin due to proposed tariffs and counter tariffs. The short-term reprieve also offered U.S. telecom firms an opportunity to re-draw their supply chain mechanism and reduce dependency on Huawei to avert a possible future backlash. Although both the countries have pledged to continue their trade talks, no date has yet been finalized for the September meeting. The Trump administration has further remained non-committal about the proposed tariffs that are likely to be effective Sep 1.

Despite the visible camaraderie, U.S. officials are reportedly blocking an initiative to connect Los Angeles with Hong Kong via undersea cables on national security grounds. The multi-agency review panel known as Team Telecom, headed by the Justice Department, has refused to grant permission for the nearly 8,000-mile-long Pacific Light Cable Network over concerns related to its Chinese investor. In addition, political unrest due to purported plans to integrate the autonomous nation with China has put the project in jeopardy. The Trump administration is also supposedly sitting on about 130 applications received by the Commerce Department for issue of licenses for the trade of U.S. goods with Huawei. With no progress yet being made to break the trade embargo on Huawei, the bonhomie is likely to be put to test once the two sides sit across the negotiation table.      

Meanwhile, leading domestic telecom carriers have joined forces to clamp down on robocalls or unwanted phone calls, and have struck an agreement with attorney generals of all the states and the District of Columbia. The deal is aimed to shield consumers from this growing menace and eliminate the root cause by empowering law enforcement agencies to investigate and prosecute the perpetrators. In particular, the agreement calls for the launch of free call-blocking technology and making other free anti-robocall devices and apps available to subscribers to curb the exponential growth of robocalls.
Regarding company-specific news, legal stay, 5G launch and strategic collaborations primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.      Qualcomm Incorporated QCOM has secured a partial stay on the adverse anti-trust ruling by federal judge Lucy Koh from the United States Court of Appeals for the Ninth Circuit. The temporary relief, pending appeal, is likely to offer a lifeline to the chipmaker in safeguarding its business interests and maintain seamless operations, which would otherwise go haywire if the decision was implemented.

The trial seemed to invoke mixed responses from within the government as the Department of Justice – the other primary antitrust regulator in the country – disagreed with FTC's legal theory and viewed the decision as anti-consumer. The Pentagon and the Department of Energy also observed that enforceability of the decision would harm national security interests. (Read more: Qualcomm Wins Stay in Antitrust Ruling Against FTC)
2.     Sprint Corporation S has launched True Mobile 5G service in areas of Los Angeles, New York City, Phoenix and Washington, DC. With this move, the company’s next-gen wireless service is presently live in parts of nine major markets.

Sprint’s 5G spans around 2,100 square miles, with about 11 million people expected to be covered in entirety across all nine market areas in the coming days. Reportedly, this is more than any other U.S. carrier to date. (Read more: Sprint Launches 5G in 4 More Cities to Extend Coverage)

3.      BlackBerry Limited BB has inked a strategic agreement with Geotab for an undisclosed amount to augment fleet productivity, improve asset utilization and reduce operating costs. The collaboration will mark the introduction of BlackBerry Radar, an IoT based asset-tracking solution, on the Geotab Marketplace — an integrated online solutions center for fleet management.

The addition of BlackBerry Radar will augment Geotab Marketplace’s location visibility, while offering additional data related to route and mileage, temperature, humidity and cargo load state within a single user-interface platform. (Read more: Blackberry Partners With Geotab for Higher Fleet Efficiency)

4.     Per media reports, Verizon Communications Inc. VZ has announced a new partnership with Boingo Wireless, Inc. — a Los Angeles, CA-based wireless connectivity solutions provider — to continue its lead in promulgating next-gen 5G mobile networks nationwide.

Boingo builds Wi-Fi networks at large-scale venues such as airports, stadiums and office buildings, using antenna systems and small cells. (Read more: Verizon Teams Up With Boingo to Promulgate 5G Coverage)

5.     Zayo Group Holdings, Inc. reported better-than-expected fourth-quarter fiscal 2019 results, wherein both the bottom and the top line surpassed the Zacks Consensus Estimate.

Net income for the June quarter was $63 million or 26 cents per share, beating the Zacks Consensus Estimate by 11 cents. Despite a year-over-year decline in revenues, the bottom line increased $20.1 million mainly driven by higher income tax benefit. Quarterly revenues slipped to $650.6 million from $657.3 million. The top line, however, surpassed the consensus estimate of $647 million. (Read more: Zayo Beats on Q4 Earnings & Revenues, Updates Merger)

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, Verizon was the biggest gainer with its share price increasing 2.3% while Juniper was the biggest decliner with its stock down 4.7%.

Over the past six months, Qualcomm has been the best performer with its stock appreciating 27.1%, while Arista Networks was the biggest decliner with its stock down 28.8%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average decline of 2.6% while the S&P 500 has rallied 1%.

What’s Next in the Telecom Space?

In addition to strategic deals, product launches and 5G deployments, all eyes will remain glued to how the government handles the trade war and its cascading effect on the industry.

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