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Telecom Stock Roundup: Verizon's 5G Speed Trial, Nokia's Software Launch & More

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In the past five trading days, telecom stocks mirrored the broader equity indices and trended down as the coronavirus pandemic wreaked havoc beyond its country of origin and affected countless people. The death toll has swelled to 2,808 worldwide so far, with 61 outside mainland China and 82,419 confirmed cases globally. With the communist government publicly admitting its failure to contain the spread of the virus, markets went on a tailspin fearing a global economic slowdown due to the cascading effect of the deadly disease.

This has disrupted normal business operations and supply-chain mechanisms of various companies as they preferred to exercise caution and put on hold their delivery schedules to and from the communist nation and countries like South Korea until the health risks are neutralized. This, in turn, triggered uncertainty within the industry, inducing a downtrend. With 60 positive cases confirmed in the United States to date, including a person with no apparent exposure to an infected person or any notable travel history, the markets remained apprehensive about possible repercussions.

Meanwhile, the Federal Communications Commission (“FCC”) has begun collating relevant data from telecom carriers about the use of telecommunications equipment and services from China-based ZTE and Huawei. The move is fallout of a FCC policy that aims to dissuade telecom carriers from utilizing Universal Service funds to purchase equipment and services from companies posing a national security threat. The information collection is a mandatory exercise for eligible telecom carriers, their affiliates and subsidiaries that receive the Universal Service funds and voluntary for others. The Trump administration is further mulling to impose tougher restrictions on the sale of essential chips and components to Huawei that are considered to be highly sensitive, while relaxing some curbs on non-sensitive chip sale. The U.S. government has even urged EU nations to shun Huawei in favor of other telecommunications equipment suppliers like Nokia and Ericsson.  

Regarding company-specific news, carrier aggregation, software launch and earnings primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     Verizon Communications Inc. VZ has collaborated with Qualcomm Technologies, Samsung Electronics Americas and Motorola Mobility to achieve peak speeds of 4.2 gigabits per second on its live 5G network. The latest feat of industry frontrunners marks a significant milestone in the era of universal migration from 4G to 5G world.

The trial was conducted in Texas to check the efficacy and viability of Verizon’s 5G Ultra Wideband network, which depends on three fundamental drivers to unleash the full potential of this cutting-edge technology. These include massive spectrum holdings, particularly in the millimeter wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy large numbers of small cells. The pilot project was run on Motorola’s upcoming 5G smartphone, which is powered by Qualcomm’s Snapdragon X55 5G modem. (Read more: Verizon Hits 4.2 Gbps Network Speed With Carrier Aggregation)
2.      Nokia Corporation NOK has introduced two new cloud-native software applications, Nokia Assurance Center and Nokia Experience Center, in a way that helps communication service providers migrate toward experience-driven and automated 5G network operations.

Built on Nokia’s Common Software Foundation, these products bring a new level of service automation and data- and customer-centricity for operators, apart from driving additional revenue sources. The Nokia Assurance Center is a multi-vendor system that provides a unified Assurance platform across traditionally disparate systems and domain silos. Leveraging Bell Labs AI and ML technology, the system is part of Nokia’s broader operations software portfolio to enable round-trip operations automation. (Read more: Nokia Advances Service Operations With Cutting-Edge Software)

3.      Intelsat S.A. reported relatively modest fourth-quarter 2019 results with both the top and bottom line exceeding the respective Zacks Consensus Estimate. However, revenues were down year over year as media revenues declined due to the increasing importance of digital platforms content.

On GAAP basis, net loss for the reported quarter was $114.9 million or loss of 81 cents per share compared with loss of $111.3 million or loss of 81 cents per share in the prior-year quarter. The wider net loss was primarily due to lower revenues and higher operating expenses. Net loss per share was, however, narrower than the Zacks Consensus Estimate of loss of 99 cents. Quarterly revenues declined 4.8% to $516.9 million but surpassed the consensus estimate of $499 million. (Read more: Intelsat Q4 Loss Narrower Than Expected, Revenues Fall)

4.      InterDigital, Inc. IDCC reported solid fourth-quarter 2019 results, wherein both the bottom line and top line surpassed the respective Zacks Consensus Estimate. Higher revenues generated from new licensing avenues highlighted the operating leverage of the company’s business model and reflected the strength of its licensing business.

Net income in the quarter was $13.8 million or 44 cents per share compared with $2.1 million or 6 cents per share in the year-ago quarter. The significant year-over-year improvement was largely attributable to higher revenues. The bottom line surpassed the consensus estimate by 17 cents. The wireless R&D company’s revenues totaled $102.2 million, up from $75.3 million in the year-earlier quarter. The top line surpassed the Zacks Consensus Estimate of $96 million. (Read more: InterDigital's Q4 Earnings Beat on Higher Revenues)

5.       Iridium Communications Inc. IRDM reported tepid fourth-quarter 2019 results wherein net loss widened but revenues increased on a year-over-year basis.

Fourth-quarter adjusted loss per share was 15 cents compared with loss of 9 cents in the year-earlier quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 18 cents. Quarterly revenues were $138.9 million compared with $132.2 million in the year-ago quarter. The rise was led by higher total service revenues and engineering and support service revenues. The top line matched the consensus estimate. (Read more: Iridium Incurs Wider Loss in Q4, Revenues Rise Y/Y)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and six-month period.

In the past five trading days, none of the stocks gained, while Qualcomm has been the biggest decliner with its stock down 13.7%.

Over the past six months, T-Mobile has been the best performer with its stock appreciating 17.7%, while Arista was the biggest decliner with its stock down 9.5%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average growth of 4.9%, and the S&P 500 has rallied 9.1%.

What’s Next in the Telecom Space?

In addition to product launches, strategic deals and 5G deployments, all eyes will remain glued to how the administration tackles the coronavirus scare and mitigates its overall impact on the industry.

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