In the past five trading days, telecom stocks’ losing streak persisted with no tangible breakthrough in trade negotiations regarding the “Phase One” deal between the United States and China. As the clock ticks for the imposition of a fresh round of U.S. tariffs on Dec 15 on $156 billion of imports from China, both sides are keen to seek an early resolution due to domestic compulsions. However, conflicting signals from the top echelons have dampened the prospects of a smooth sail and dragged the sector down.
It seems that the Sino-U.S. trade negotiations will go down to the wire with both countries aiming to bargain hard. While President Trump is seeking a pledge from the communist nation for $50 billion worth of annual purchase of U.S. farm products such as soybeans and pork, China is reportedly dragging its feet for the removal of existing tariffs. Moreover, the $50 billion target is considered to be too high as China bought $20 billion worth of agricultural goods in 2018 before the trade spat broke out.
Meanwhile, contradictory statements from the White House have kept the issue on the potboiler. While acting White House chief of staff Mick Mulvaney expressed solidarity for the resolution of the partial trade accord, the top economic adviser to the President – Larry Kudlow – hinted that the Dec 15 tariffs were “still on the table.”
Further stirring the hornet’s nest, Beijing has sought to remove all foreign hardware and software from their systems in three years in a retaliatory measure against the alleged unilateral trade sanctions against Huawei and ZTE. Set on a “3-5-2” basis, the policy aims to rip and replace 30% of foreign hardware and software in 2020, 50% in 2021 and the remaining 20% in 2022. This, in turn, is likely to affect the top line of leading U.S. technology firms and potentially disrupt their supply chain mechanism. However, U.S. lawmakers have refused to back down from the risk of blowback for American firms and pledged to take effective measures to preempt alleged spying and siphoning of data by China-based telecom firms.
Regarding company-specific news, strategic collaboration, 5G-enabled automated service, AI-powered facial recognition, acquisition and edge computing took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. BlackBerry Limited BB has collaborated with China-based electric vehicle manufacturer WM Motor to augment the in-car experience of the latter.
Per the alliance, BlackBerry QNX technology, including QNX Platform for Digital Cockpits and QNX Hypervisor for Safety, will be used in the forthcoming production run of WM Motor third-generation SUVs. This is likely to ensure co-existence of multiple operating system on the same SoC to optimize performance, increase system reliability and enable safety compliance mechanism. (Read more: BlackBerry's QNX Software to Power Next-Gen WM Motor Cars)
2. Ericsson ERIC has joined forces with Telia Company AB — a Swedish telecom and mobile network operator — and the Norwegian University of Science and Technology to showcase the unique capabilities of 5G technology in the development of autonomous transport facilities. Together, the companies demonstrated an automated ferry service in Norway, powered by 5G-enabled technology, thereby offering a glimpse of the upcoming technological innovations in the transport sector.
Dubbed milliAmpère, the automated ferry transported passengers across Trondheim’s harbor canal with sensors that recorded data from surroundings and fed to the control center. Ericsson 5G technology enabled Telia to securely support this vast data trove to effectively maneuver the ferry for a hassle-free journey. In particular, Ericsson’s 5G Radio and software, which enables upload speeds of more than 200Mbps and download speeds above 1Gbps, was the key to success, as it ensured that the vessel avoided any obstacle in its journey. (Read more: Ericsson Powers 5G-Enabled Automated Ferry Service in Norway)
3. Motorola Solutions, Inc. MSI recently announced that it has embraced AI-powered facial recognition technology with the launch of the newest version of its video management software. Avigilon Corporation, one of the operating units of Motorola, unveiled the Avigilon Control Center (ACC) 7.4 software for an easy-to-use AI-enabled user interface for enhanced safety measures in commercial enterprises.
The ACC software and connected Avigilon cameras seek to identify potential threats based on facial recognition technology to set alerts for security personnel for appropriate actions. This enables a more pro-active approach for perceived threat detection for better decision-making process. The company deems this ‘human in the loop’ approach as the cornerstone of its AI-enabled capabilities for effective compliance control mechanism. (Read more: Motorola's Avigilon Boosts Video Management Software With AI)
4. TELUS Corporation’s TU subsidiary, TELUS International, is reportedly planning to acquire Competence Call Center for approximately C$1.3 billion (nearly $1 billion).
The deal, one of the biggest in TELUS’ history, is aimed at fostering its operational and financial strength by focusing more on customer experience, content moderation, risk management, consulting services and back-end operations to expand footprint in Europe. Post completion, the Canadian telco firm is expected to emerge as a market leader in customer service by providing top-notch business process solutions to some of the world’s most established brands. (Read more: TELUS to Augment Scale of Operations With Competence Buyout)
5. CenturyLink, Inc. CTL has fortified its global edge delivery footprint in 11 cities across Asia Pacific (APAC) by leveraging the revamped version of its Edge Computing platform — Content Delivery Network (CDN).
With increased bandwidth, the augmentation of CDN has been primarily undertaken to cater to burgeoning demands from over-the-top video streaming platforms, advanced gaming platforms and global broadcasters. The strategic move is likely to facilitate the digital transformation of most APAC businesses and enable them to shift toward an agile networking infrastructure that seamlessly integrate various technology platforms, applications and services. (Read more: CenturyLink Fortifies Edge Computing Services in Asia Pacific)
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, Qualcomm has been the biggest gainer with its share price increasing 5.6%, while T-Mobile has been the biggest decliner with its stock down 5%.
Over the past six months, CenturyLink has been the best performer with its stock appreciating 20.4%, while Arista Networks has been the biggest decliner with its stock down 26.6%.
Over the past six months, the Zacks Telecommunications Services industry has recorded average growth of 3% and the S&P 500 has rallied 8.5%.
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 government handles the various issues relating to the “Phase One” deal.
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