In the past five trading days, telecom stocks witnessed a remarkable turnaround as the Trump administration 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 an opportunity to re-draw the supply chain mechanism and reduce dependency on Huawei to avert a possible future backlash. However, latent fears related to the execution of a mutually agreeable trade deal remained a potent threat that partially disrupted the uptrend near the end of the past week.
The U.S. Department of Commerce seemingly fired a double-barrel gun when it offered an extension to domestic firms to continue trade with Huawei till Nov 19 on one hand and added a fresh list of 46 Huawei affiliates to the Entity List on the other. These included global R&D and innovation centers of the Chinese telecom major as the U.S. government aimed to stifle the company from extending its market dominance as 5G deployments across the globe pick up pace. Meanwhile, the stop-gap arrangement provided a much-needed boost to the beleaguered industry that battled trade uncertainty with continued tariff war.
The Trump administration has also remained non-committal about the proposed tariffs that are likely to be effective Sep 1. Notably, the U.S. government had earlier decided to impose 10% tariff on $300 billion of Chinese imports from next month before Trump opted to delay taxing about 60% of the items from the list until Dec 15. These included cellphones, video game consoles, computer monitors, some clothing and footwear items that formed a sizeable portion of the consumer shopping basket. The strategic decision was aimed to offer some respite to the retailers and enable them to stockpile things for the back-to-school and holiday season. The two back-to-back rollbacks seem to hint that the U.S. consumers are feeling the tariff pinch, offering hopes of a possible patch-up at a later date.
Although the two warring countries are expected to resume their trade negotiations in September, tense undercurrents related to Huawei continued to linger. An escalation of the trade conflict is in the cards as the communist nation has threatened to deal fire with fire.
Regarding company-specific news, media strategies, patent deals, product launches and collaborations primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Leading telecom service providers Verizon Communications Inc. VZ and AT&T Inc. T have embarked on divergent strategies for the local TV service to meet their corporate objectives. The purported moves seem to be the call of the hour as the battle for survival gets murkier with intense price competition and more content-driven options from Amazon.com, Hulu and Netflix.
Verizon has reportedly decided to wind up the operations of news channel Fios1 News, which is one of the two hyperlocal cable-news channels serving New York City’s metro area. AT&T has rolled out a service for television viewers to attract more consumers who are lured by the rich video content of avant-garde media firms. (Read more: Telecom Carriers Deploy Divergent Local TV Service Strategies)
2. Qualcomm Incorporated QCOM has inked a new five-year, royalty-bearing patent license deal with LG Electronics Inc. in the light to develop and sell 3G, 4G and 5G smartphones. The move is in accordance with the chipmaker’s global licensing terms.
The agreement underscores Qualcomm’s established technology relationship and reiterates the value of its superlative patent portfolio. It is the developer of foundational technologies for the wireless industry. The company seeks to make its breakthrough technologies available to leading OEMs like LG, and to support them in delivering compelling products worldwide. (Read more: Qualcomm Inks New Global Patent License Agreement With LGE)
3. In one of the most pioneering deals in the industry, Altice USA, Inc. ATUS has inked an agreement with CuriosityStream, an award-winning factual streaming service from the founders of Discovery Channel, to offer the latter’s rich content across its distribution network. The subscription video on demand service will offer an unlimited access to a wide range of programs, with stunning visuals and unrivaled storytelling that demystify science, nature, history, technology, society and lifestyle.
The strategic deal will offer Optimum and Suddenlink users an immediate complementary access to CuriosityStream content. The company further plans to add CuriosityStream to its Altice One entertainment and connectivity platform, along with the ‘On Demand’ platform and mobile apps, for a seamless viewing. (Read more: Altice Offers Novel SVOD Service From CuriosityStream)
4. ADTRAN, Inc. ADTN recently announced the launch of its fully managed, cloud-based performance test solution with an aim to modernize data collection and reporting for network operators that use the Connect America Fund program.
This end-to-end solution equips service providers with the tools required to easily collect and submit performance testing data. It facilitates providers to cover every FCC aspect, from the customer network to the test server to reporting requirements. (Read more: ADTRAN Brings Cloud-Based CAF Performance Test Solution)
5. CenturyLink, Inc. CTL has expanded its SIMPLE for Business portfolio of prepaid services to include SIMPLE Internet + Digital Phone to help small businesses to plan for their monthly outlays as cost control has become a top priority.
The company’s bundled service comprises Internet speed of up to 140 Mbps, and digital phone service with unlimited nationwide calling, instant messaging, video conferencing and file sharing. It also covers convenient online ordering with a credit card and a consistent monthly service rate to help manage expenses. (Read more: CenturyLink Expands SIMPLE Service for Small Business Owners)
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, Qualcomm was the biggest gainer with its share price increasing 7.6% while Juniper was the sole decliner with its stock down 1.5%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 30.9%, while Arista Networks was the biggest decliner with its stock down 23.3%.
Over the past six months, the Zacks Telecommunications Services industry has recorded average decline of 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 trade war issues and their cascading effects on the industry.
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