Telecom Stock Roundup: AT&T Wins Spectrum Licenses, Nokia's Deal & More

In the past five trading days, telecom stocks traded relatively flat for the most of the week to end in a surge, as President Trump and his Chinese counterpart showed intention to resume bilateral trade talks as early as next week. Before the state heads meet on the sidelines of the G20 summit in Osaka, Japan, high-level officials are likely to set the ball rolling to pull bilateral ties away from brinkmanship that has dragged relations to its nadir.

The telecom industry has bore the brunt of the tariff war with various trade restrictions affecting the supply chain mechanism and risking the sustainability of businesses. While several U.S. firms have appealed to the government to ease the trade embargoes, the global telecom industry has showed signs of massive disruption. The story is somewhat similar on the other side as well, with China telecom sector recording slower revenue growth as it continues to feel the pinch.

The trade negotiations between the two warring countries will aim to resolve these issues. In addition, experts widely view the change of stance as a possible ploy by Trump to get wind in the sail of his re-election campaign. However, he was quick to point out that the deal, if any, would be ‘fair deal’ to both the countries. China’s foreign ministry also remained optimistic about the resumption of the bilateral talks, but maintained that discussions must be on ‘equal basis’.

The tense undercurrents were further amplified when China’s leading smartphone manufacturer Huawei announced that its overseas sales plunged about 40% as a fallout of the U.S. tariffs and trade sanctions by various European firms. The company aims to reduce its annual production by $30 billion over the next two years to tide over the storm. In a likely counter attack, Huawei intends to utilize its 56,492 patents on telecommunications, networking and other hi-tech inventions worldwide to gain leverage on U.S. firms and demand patent settlements to the tune of $1 billion. The technology warfare between the two nations, with Huawei at the centerstage, took a fresh turn when U.S. Senator Marco Rubio filed a legislation to prevent such an eventuality and negated the threat with the amendment to the National Defense Authorization Act.

It remains to be seen how the bilateral negotiations pan out in the future and eliminate the various stumbling blocks that threaten to derail the global economy with an element of uncertainty.  

Regarding company-specific news, spectrum license wins, earnings, strategic deals and unveiling of growth framework primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     Following the completion of the latest round of telecom spectrum auction by the Federal Communications Commission – FCC Auction 102 – AT&T Inc. T has emerged as the leading bidder among all participants. The company has reportedly won spectrum licenses that cover about 98% of the U.S. population, offering it a competitive advantage for seamless 5G deployment across the country.

In particular, AT&T has won 24 GHz spectrum in 383 Partial Economic Areas for a nationwide average of 254 MHz. Bulk of the license wins were secured in the upper 500 MHz portion of the 24 GHz band, which will enable the company to command a strong nationwide coverage with solid spectrum depth and capacity in several top markets where demand is often the greatest. Notably, AT&T has won nearly 286 MHz of broadband spectrum on average in the top 10 markets. (Read more: AT&T Augments Spectrum Capacity for Extensive 5G Rollouts)

2.    Nokia Corporation NOK has inked an agreement with utility firm — Cleco Holdings — to modernize the latter’s microwave communications network to better serve customers. The deal is expected to improve the operational efficiency of Cleco by replacing its legacy hybrid radio equipment with Nokia’s state-of-the-art packet-based architecture. This, in turn, is likely to provide the utility firm with the scalability and flexibility to support the mission-critical communication businesses of its customers.

Leveraging microwave packet radio technology and Microwave Packet Transceiver Plus platform, Nokia will offer Cleco the wherewithal to cater to the evolving demands of about 290,000 customers in Louisiana and Mississippi. At the same time, the infrastructure upgrade will provide the requisite backhaul of the digital mobile radio system that is critical to the safety of its customers and more than 1,300 employees. (Read more: Nokia to Modernize Microwave Communications Network of Cleco)

3.   Finisar Corporation’s FNSR fourth-quarter fiscal 2019 (ended Apr 28, 2019) revenues remained almost flat year over year but net loss narrowed. The bottom-line performance was largely driven by lower cost of sales.

Non-GAAP net income for the reported quarter came in at $33 million or 27 cents per share, beating the Zacks Consensus Estimate by a penny. Quarterly revenues remained almost flat year over year at $310.1 million. The top line lagged the consensus estimate of $328 million. (Read more: Finisar Q4 Earnings Beat Estimates, Revenues Miss)

4.     Verizon Communications Inc. VZ has inked an agreement with the National Basketball Association (“NBA”) to augment network capabilities of all the 29 arenas that host NBA teams. The improved bandwidth connectivity through Verizon’s fiber-optic network will offer high-resolution video to fans across the world to relive the key moments of the match without compromising on finer details.

Verizon will connect each arena with two diversely routed 100G fiber circuits. This is likely to result in a 10-fold increase in network bandwidth to enable seamless transmission of all the sporting actions without any interruption. The company further intends to install about 30 cameras in NBA arenas to cover the events from every possible angle. (Read more: Verizon Augments NBA Network Capabilities With Fiber Optics)

5.     Corning Incorporated GLW, in its recently held meeting with investors and industry analysts, has unveiled 2020-2023 Strategy and Growth Framework. The company also discussed progress and pipeline developments across its five market-access platforms.

Corning aims to deliver continual growth and create additional value for shareholders on the back of benefits from its investments, adoption of technologies aligned to key industry trends and its cohesive product portfolio. The specialty glass maker’s new long-term goals should build on the success of its 2016-2019 Strategy and Capital Allocation Framework, while capturing future organic growth opportunities. (Read more: Corning Sets 2020-2023 Strategy and Growth Framework Targets)

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, Sprint was the biggest gainer with its share price increasing 11% while Juniper Networks was the sole decliner with its stock down 0.4%.

Over the past six months, Harris Corporation has been the best performer with its stock appreciating 35.2%, while none of the stocks declined.

Over the past six months, the Zacks Telecommunications Services industry has recorded an average gain of 3.1% while the S&P 500 rallied 17.2%.

What’s Next in the Telecom Space?

In addition to product launches and deployment of 5G technologies, all eyes will remain glued to how the United States and China embrace the fresh round of trade negotiations and its spiraling effect on the industry.

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Nokia Corporation (NOK): Free Stock Analysis Report

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

AT&T Inc. (T): Free Stock Analysis Report

Finisar Corporation (FNSR): Free Stock Analysis Report

Corning Incorporated (GLW): Free Stock Analysis Report

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