Telecom Stock Roundup: Verizon to Initiate 5G in 2017, Qualcomm Decides Not to Split Operations

The telecom sector witnessed a series of consequential events last week. U.S. telecom major Verizon Communications Inc. VZ announced plans to start field trials for its upcoming 5G wireless network with its partners in 2016. The company is preparing for initial deployment of the next-generation 5G wireless networks in the U.S. in 2017. Verizon claims that its 5G network will provide a download speed of 1 Gbps (gigabit per second), which is 200 times the throughput of the currently available standard 4G LTE network.

In a major strategic decision, Qualcomm Inc. QCOM , the largest mobile chipset manufacturer globally, has decided to retain its corporate structure and not separate its chip making and technology licensing businesses. The strategic review committee and the board of directors have collectively concluded that the company's current structure presents exceptional strategic benefits for technological leadership and product strength. The present business alignment will also help the company deliver maximum value to shareholders going ahead.

Meanwhile, T-Mobile US Inc. TMUS is leaving no stone unturned to maintain its third highest position in the U.S. wireless market as well as counter competition. Recently, the company announced another attractive offer, this time to entice Verizon's customers. T-Mobile US is offering Verizon customers, premium Hulu services free of charge for a year, provided they switch to its network. Hulu offers the latest episodes from popular TV shows, movies, documentaries and more.

In an interesting development, U.S. telecom regulator, the Federal Communications Commission (FCC), gave its nod to the proposed wireless spectrum swap deal between T-Mobile US and Verizon, rejecting satellite TV broadcaster SIRIUS XM Holdings Inc.'s SIRI objection. After hearing both sides' arguments, the FCC ruled that SIRIUS XM failed to provide adequate reasons in favor of its argument and cleared the deal without imposing any restrictive conditions. The regulator, however, retained SIRIUS XM's right to seek justice on the alleged interference problem in a different proceeding.

AT&T Inc. T , in the meantime, unveiled its much-awaited cross-platform 'NumberSync' services with Samsung Gear S2. The service will allow users to make and receive calls, send text messages and receive other alerts on their Samsung smart watches and other wearable devices through the carrier's 3G or 4G LTE network.

Alongside, the company has decided to increase the prices of voice and U-verse video service with effect from 2016. Almost all the TV packages are poised to see prices going up by $2 per month. The voice plans too, are expected to be dearer by a minimum of $2 per month.

According to a recent report by research firm International Data Corporation (IDC), worldwide spending on Internet of Things (IoT) is slated to grow at a 17% compound annual growth rate (CAGR) to nearly $1.3 trillion in 2019 from $698.6 billion in 2015. Massive growth of 4G LTE (Long-Term Evolution) and LTE-A (Advanced) networks across the globe will lead the smooth transition from 4G to the upcoming 5G network standard. Superfast 5G mobile networks will be of utmost necessity in managing the exponential growth of IoT.

Meanwhile, Internet advertising revenues reached a new milestone in the third quarter of 2015, as reported by two renowned research firms Interactive Advertising Bureau (IAB) and PwC US. According to the reports, Internet advertising revenues in the U.S. reached $15 billion in the quarter, up 23% from the third quarter of 2014 and up 5% from second-quarter 2015. The research includes data concerning online advertising revenues from web sites, commercial online services, free e-mail providers, video streaming services and several other companies selling online advertising services.

Outside the U.S., Spain-based Telefonica S.A. TEF announced its plans to launch video services in seven new Latin American markets in 2016. If things go as planned, it will make Telefonica the largest pay-TV operator in the Spanish and Portuguese TV content space.

Read the last Telecom Stock Roundup for Dec 10, 2015.

Recap of the Week's Most Important Stories

1. Verizon, which was the first to deploy the 4G LTE network nationwide six years ago, will give trial run of the 5G wireless network at its Basking Ridge, N.J. headquarters early next year. Soon after that, the company is also likely to roll out some pilot projects with its vendors and select users in San Francisco, New York, and Boston. (Read More: Verizon to Commercially Deploy 5G Wireless Networks in 2017 .)

2. Qualcomm recently completed the six-month strategic review by a special committee - prompted by activist investor Jana Partners - on whether the company should split its businesses. Notably, the review considered options like full or partial separation of the chip and licensing businesses, setting up a subsidiary IPO, issuing tracking stock and other changes to the company's capital structure. (Read More: Qualcomm Discards Split Option Post Board Review .)

3. T-Mobile US' bid to entice rival carriers' customers reflects the cutthroat competition that is typical of the U.S. cellular market, leaving little scope for new subscriber growth. The company's strategy of offering lucrative promotion schemes is likely to bear fruit this holiday season and help draw more customers thereby lending an edge over other major U.S. wireless carriers. (Read More: T-Mobile Comes Up with Free Hulu Offer for Verizon Users .)

4. Earlier this year, T-Mobile US had entered into an agreement to swap certain AWS-1 and PCS spectrum licenses with Verizon in various markets across the U.S. The deal was valued at $173 million. Notably, T-Mobile US is expanding its 4G LTE networks capitalizing on the AWS band of spectrums.

Initiated in 2013, the company's LTE network currently covers around 300 million POPs (point-of-presence). SIRIUS XM had filed an objection to this deal to the FCC in Aug 2015 claiming that T-Mobile US' AWS-1 cell sites are interfering with its receivers. (Read More: FCC Approves T-Mobile US-Verizon Spectrum Swap Deal .)

5. Internet of Things (IoT), which enables any physical electronic device with a valid IP address to transfer data seamlessly over a wireless network, is the latest in the league of service and business models that is rapidly gaining market traction.The IoT is a network of physical objects embedded with electronics, software, sensors and connectivity that enables it to achieve greater value and service by exchanging data with other connected devices. (Read More: Internet of Things Prospers Globally, Investment Ramps .)

Price Performance

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

Company Last Week Last 6 Months
VZ 2.54% 0.52%
T 2.47% 1.99%
S -1.34% -20.47%
TMUS 8.48% -0.72%
VOD -0.37% -10.05%
CHL 1.17% -8.29%
AMX 5.36% -21.24%
CMCSA 0.19% 0.53%
DISH -1.14% -18.45%

Over the last five trading sessions, the share price movement of most of the major telecom stocks was positive. T-Mobile US (8.48%) and America Movil SAB AMX (5.36%) gained the most over the past week. On the contrary, over the last six months, the price performance of key telecom stocks has been predominantly negative . America Movil (21.24%) Sprint Corp. S (20.47%) and DISH Network Corp. DISH (18.45%) depreciated substantially over the six-month period.

What's Next in the Telecom Sector?

In the coming week, beleaguered mobile handset developer BlackBerry Ltd. BBRY will release its third quarter of fiscal 2016 financial results. The market is expected to closely evaluate the results, looking for a possible turnaround at the company, which once dominated the smartphone segment. Investors are also likely to gain more information about BlackBerry's recent launched Android-based handset PRIV and its BES12 software platform.

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AT&T INC (T): Free Stock Analysis Report

TELEFONICA S.A. (TEF): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

AMER MOVIL-ADR (AMX): Free Stock Analysis Report

SIRIUS XM HLDGS (SIRI): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

QUALCOMM INC (QCOM): Free Stock Analysis Report

T-MOBILE US INC (TMUS): Free Stock Analysis Report

BLACKBERRY LTD (BBRY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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