Telecom Stock Roundup: Verizon Capital View Up, US Cellular Spectrum Usage & More

Over the past five trading days, telecom stocks mirrored the broader equity indices and exhibited a roller-coaster ride. The stocks initially trended down as the coronavirus pandemic reached epic proportions, recovering remarkably as the Federal Communications Commission (FCC) invoked a comprehensive policy to handle the upsurge in broadband traffic. However, with the United States and China playing the blame game about the origin of the virus, the markets trended down fearing a ripple effect on the industry, only to reverse the trend on government promise of an economic stimulus.

In order to prevent the spread of this contagious disease in a community, governments across the globe are increasingly advocating social distancing methods. The threat of community transmission is being perceived as a potent risk factor, compelling local administration and healthcare officials to issue advisories to abstain from large social gatherings. In addition, most corporate firms are encouraging employees to work from the safety of their homes for at least the end of this month to avoid being infected through possible exposures. This, in turn, has led to an exponential demand for Internet traffic, forcing the FCC to adopt the "Keep Americans Connected Pledge."

Per the 60-day pledge, telecom service providers will not be able to terminate their service for residential or small businesses for non-payment of bills as well as waive any late payment fees due to the economic impact of the virus. At the same time, the government directive has asked telecom firms to provide access to public Wi-Fi spots to the masses to stay connected during this crisis period. Almost all leading companies joined this federal initiative, while some others like AT&T (NYSE:T) even suspended broadband data caps for household Internet plans. This probably reposed investor confidence as the markets took a breather from the freefall and scripted a brief turnaround.

The global pandemic created an unwanted reason to worry as both the United States and China blamed each other regarding the origin of the virus and the use of chemical warfare to gain a competitive edge. This is likely to dent the bonhomie and the continuing trade negotiations between the two countries, affecting bilateral trade, in particular, and the global economy as a whole, especially when the world is reeling under the deadly coronavirus attack. The telecom industry is also anticipated to feel the heat as the communist nation is considered to be one of the most important global markets. This, in turn, has triggered insecurity within the industry, inducing a downtrend.

Meanwhile, the Trump administration has initiated a fresh bribery investigation of China-based telecommunications equipment manufacturer, ZTE (HK:0763), just days after the end of its corporate probation period under the March 2017 plea agreement it had signed with the U.S. Justice Department. This is likely to further sour the strained relationship between the two countries, fueling insecurity within the broader sector.

Regarding company-specific news, capital investment update, spectrum usage, collaboration and strategic investment primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Verizon Communications Inc. (NYSE:VZ) has raised its capital expenditure guidance for 2020 on higher planned investments to augment the infrastructure for increased 5G deployment across the United States. The company expects that the increased capital outlay would enable it to meet the higher demand for video-intensive applications and support the transition to the super-fast 5G network.

For 2020, Verizon anticipates capital expenditure of $17.5-$18.5 billion, up from $17-$18 billion expected earlier. These include the addition of small cells, MIMO antenna technology advancements and extensive fiber network connectivity for greater capacity and speed for customers. The company expects such focused infrastructure upgrade to better equip the country to fight disruptive market forces led by the coronavirus pandemic. (Read more: Verizon Raises Capital Outlay View for Higher 5G Investments)

2. United States Cellular Corporation (NYSE:USM) has secured the FCC Special Temporary Authority to use additional spectrum to meet increased customer demand for mobile broadband during the virus outbreak. It is the second wireless carrier to get such a grant after FCC gave a similar approval to T-Mobile.

As a result, U.S. Cellular will be able to operate for 60 days in spectrum licensed to Advantage Spectrum in the AWS-3 Band in order to provide further capacity to customers in parts of California, Oregon, Washington and Wisconsin. With such efforts, U.S. Cellular is looking for ways to better serve customers who are making adjustments in their daily lives to minimize in-person interactions and slow the spread of the virus. (Read more: U.S. Cellular Gets More Spectrum Amid Coronavirus Scare)

3. Juniper Networks, Inc. (NYSE:JNPR) recently invested an undisclosed amount in StackPath LLC, a global platform that offers secure edge computing resources, to fund R&D, engineering and go-to-market efforts within the organization. This, in turn, will likely facilitate diverse businesses to harness edge connections and edge computing capabilities for scalable mission-critical applications.

With the latest round of equity financing from Juniper and Cox Communications, StackPath has so far raised about $396 million to accelerate the development of edge computing solutions. Notably, edge computing marks a positive stride forward in providing faster processing and potentially enhanced security for business applications. (Read more: Juniper Invests in StackPath Edge Computing Platform)

4. Ericsson (BS:ERICAs) (NASDAQ:ERIC) has inked an agreement with Omantel to manage its multi-vendor mobile networks in Oman. The strategic deal, which has been renewed for the next five years, underscores the Swedish equipment maker’s efforts to capitalize its best-in-class capabilities in automation platforms, thereby benefiting Omantel with seamless network infrastructure and enhanced customer experience.

Pursuant to the agreement, Ericsson’s advanced portfolio of 5G technology and automation use cases will enhance Omantel’s fixed and multi-line (2G, 3G, 4G and 5G) network access to deploy improved network performance in the Middle East. (Read more: Ericsson Partners Omantel to Boost Network Digitalization)

5. Nokia (HE:NOKIA) Corporation (NYSE:NOK) has teamed up with the national railway company of Switzerland — Swiss Federal Railways — for the development of an innovative rail system for smartrail 4.0 project. In order to achieve this milestone, the Finnish network provider successfully completed a proof-of-concept trial of the Future Railway Mobile Communication System (“FRMCS”) standard.

Per the trial, both companies leveraged LTE 1900MHz Time Division Duplex radio frequency and advanced measuring instruments to demonstrate the feasibility and efficacy of FRMCS. Slated to be launched in 2025, the innovative framework provides high-speed, ultra-reliable and low-latency networks that enable smart rail maintenance with faster communications. (Read more: Nokia Boosts Swiss Rail Services With FRMCS Frequency Trial)

Price Performance

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

In the past five trading days, none of the stocks moved up, while Qualcomm (NASDAQ:QCOM) has been the biggest decliner with its stock down 21.9%.

Over the past six months, none of the stocks moved up, while Arista was the biggest decliner with its stock falling 35.6%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average loss of 17.9%, while the S&P 500 declined 15.6%.

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 attempts to mitigate its overall impact on the industry.

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Verizon Communications Inc. (VZ): Free Stock Analysis Report

Nokia Corporation (NOK): Free Stock Analysis Report

Juniper Networks, Inc. (JNPR): Free Stock Analysis Report

United States Cellular Corporation (USM): Free Stock Analysis Report

Ericsson (ERIC): Free Stock Analysis Report

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