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Telecom Stock Roundup: AT&T to Divest Assets, Ericsson's Rural Support & More

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In the past five trading days, telecom stocks witnessed an uptrend as the United States and China reached a preliminary trade deal, representing a major breakthrough in the 18-month old trade war that hurt the economies of both nations. The partial trade accord is likely to ease the bilateral tensions between President Trump and his Chinese counterpart, who are expected to formally sign an agreement as early as next month. Although the specifics of the “Phase One” deal is yet to be chalked out in detail, the positive vibes have led to wide expectations of improving market conditions.

Per the mutually agreeable trade accord, China will significantly step up its purchase of U.S. farm products such as soybeans, pork and other agricultural commodities to the tune of $40-$50 billion a year. In addition, the communist nation has agreed to take certain measures related to IP rights and award concessions pertaining to financial services and currency. In return, the United States has agreed to defer a tariff hike on $250 billion worth of Chinese imports, which was slated to go into effect on Oct 15. However, the U.S. government remained non-committal about the proposed tariffs on $156 billion worth of Chinese import basket that are scheduled to come into force from Dec 15.

So far, the trade agreement is in principle and not put on paper. Contingency to the success of this deal, the Trump administration intends to discuss the issues related to the trade restrictions imposed on Chinese telecom equipment manufacturer Huawei in “Phase Two”. Other contentious issues related to structural changes in the Chinese trading and economic system to eradicate alleged IP theft, forced technology transfer and state-sponsored subsidies are also likely to be discussed in the next stage of the negotiation. Meanwhile, Trump has reportedly given the green light to the issue of licenses to U.S. firms for trading with Huawei. This is likely to give a much-needed boost to the beleaguered industry and provide an impetus to restore normal businesses with China – one of its most important global markets.    

Regarding company-specific news, divestment, footprint expansion, technology acquisition and network deployment primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.      In order to trim its huge debt profile, AT&T Inc. (T - Free Report) has communicated plans to sell its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America.

The transaction comprises network assets, including spectrum, real estate and leases. It also involves customers, including 1.1 million wireless subscribers. The move is an outcome of the company’s ongoing strategic review of its balance sheet and assets to identify opportunities for monetization. Upon closure, about 1,300 AT&T employees will move to Liberty Latin America. (Read more: AT&T to Divest Assets in Puerto Rico & U.S. Virgin Islands)
2.     Ericsson (ERIC - Free Report) has collaborated with Xtreme Enterprises to offer support services to rural Wireless Internet Service Providers (WISPs) across the United States.

Per the deal, Ericsson will provide its industry-leading radio system for use across Xtreme Enterprises' network solution and service portfolio to deliver stable broadband speed and reliability of data usage. With Ericsson’s state-of-the-art LTE equipment, Xtreme Enterprises aims to facilitate the WISPs to extend coverage by reaching more customers with higher speeds. In particular, it will offer Ericsson's Micro Radio 2208, which delivers the highest allowable power output for outdoor deployments, for Citizens Broadband Radio Service. (Read more: Ericsson to Support Rural Wireless Internet Service Providers)

3.      CommScope Holding Company, Inc. (COMM - Free Report) has augmented its already impressive patent tally with the acquisition of the base station antenna technology from Fractus SA, thereby amicably settling the pending dispute regarding its use.

The CommScope settlement involves the technology transfer for the entire portfolio of Fractus’ base station antenna patents. Notably, CommScope holds about 1,500 patents worldwide on its own, including more than 700 related to base station antenna technology. Consequently, the extensive portfolio of base station antenna systems is likely to help operators improve their network capabilities for increased 5G deployment. (Read more: CommScope Boosts Patents Tally With Fractus Suit Settlement)

4.     CenturyLink Inc. (CTL - Free Report) has expanded its scalable cloud networking solutions for improved connectivity to cloud environment to better serve the evolving demands of business enterprises.

The expansion of the Cloud Connect Dynamic Connections service of the company to Google Cloud Platform will facilitate business enterprises to seamlessly connect and control bandwidth according to their requirements. In addition, the company has introduced a simple pay-as-you-go billing model that provides the flexibility to add and remove services as needed, without any long-term liability. (Read more: CenturyLink Augments Network Connectivity to Google Cloud)

5.     ADTRAN, Inc. (ADTN - Free Report) recently announced that it is assisting toob — a full-fiber broadband provider in the United Kingdom — deliver gigabit speed to more than 100,000 premises by the end of 2021. Initial deployments are planned across the South of England.

Markedly, the networking equipment maker provided toob with turnkey support that comprised delivery, installation and commissioning of toob’s core, transport and access network. Leveraging ADTRAN’s TA5000 gigabit services platform, the broadband provider deployed its network. (Read more: ADTRAN Supports toob Deliver Gigabit Speeds to Premises)

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, CenturyLink was the biggest gainer with its share price increasing 6.2% while none declined.

Over the past six months, Motorola has been the best performer with its stock appreciating 16.8%, while Arista Networks was the biggest decliner with its stock down 35.3%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average growth of 2.3% while the S&P 500 has rallied 2.5%.

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 various issues related to trade war negotiations.

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