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Telecom Stock Roundup: Qualcomm Buys Veoneer, Viasat Boosts IFC in Brazil & More

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·7 min read
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Over the past five trading days, U.S. telecom stocks have traded relatively flat as the $1.2 trillion infrastructure bill failed to progress in the House despite the best efforts of the government to broker a compromise with the dissident groups. It remained stuck in a potential stalemate as several progressive Democrats wanted it to be tied to the larger $3.5 trillion budget reconciliation bill that is facing massive backlash from both Republicans and Democrats. This, in turn, forced Democratic Speaker Nancy Pelosi to delay voting on the bill until a wider consensus was reached. The infusion of federal funds to improve broadband infrastructure for greater access and deeper penetration in the underserved domestic markets is likely to bridge the digital divide and help realize President’s Biden goal of providing all Americans with affordable Internet connectivity. However, uncertainty over the much sought-after infrastructure bill has failed to spur any growth momentum in the industry.

The Democrats have presently set a deadline of Oct 31 to pass the bill, the day on which major transportation funding programs are slated to expire. President Biden is reportedly negotiating with the progressives and has put forth a range of $1.9 trillion to $2.2 trillion for the social spending reconciliation package. The ongoing negotiations are expected to lead to a broader consensus on some of the sweeping policies that the government is aiming to implement before November 2022 congressional elections. The infrastructure investments are also billed as a critical factor to better compete with adversaries such as China.

While the policy paralysis has continued to cripple operations, the ‘rip and replace’ policy of the FCC has led to widespread resentment among rural telecom firms. The removal of the low-cost gear is likely to affect rural network service, hurt profitability, and risk sustainability as most local operators are forced to reshuffle their existing infrastructure without focusing on infrastructure upgrades for 5G deployment to help realize the President’s broadband objective. Although the FCC is slated to initiate a $1.9 billion program to reimburse the carriers by seeking applications from Oct 29 through Jan 14, 2022, it is unlikely to pacify the huge number of rural telecom operators that are likely to go out of office.

Regarding company-specific news, acquisition, strategic agreements, portfolio enhancements, and product launches primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Qualcomm Incorporated QCOM has inked a definitive agreement with SSW Partners to acquire Veoneer, Inc. in an all-stock deal worth $4.5 billion, or $37.00 per share. The transaction is likely to be completed in 2022, subject to mandatory regulatory approvals and other closing conditions. The transformative deal is expected to offer Qualcomm a firmer footing in the emerging market of driver-assistance technology, as it aims to extend the Snapdragon Ride Advanced Driver Assistance Systems (ADAS) portfolio.

With the acquisition, Qualcomm aims to incorporate Arriver's Computer Vision, Drive Policy, and Driver Assistance assets into its ADAS portfolio to deliver an open and competitive platform for automakers to better compete with rivals within the self-driving vehicle market. This, in turn, is likely to augment its automotive business as it strives to boost revenues beyond chipmaking for the smartphone market.

2. Viasat Inc. VSAT has secured a prime contract for Ka-band satellite in-flight connectivity (IFC) solutions for the business aviation market in Brazil. The improved IFC services will offer enhanced Internet capabilities with best-in-class in-flight entertainment options to entice more customers and will likely contribute to the gradual recovery of the airline industry from the COVID-19 setbacks.

The business aviation market in Brazil is reportedly the third largest in the world and assumes relative importance as the key gateway to Latin American markets. Business aviation is often considered as an economic lifeline for areas with limited options for business transportation and contributes significantly to the local and national economies. With government-friendly policies, the business aviation market in Brazil is likely to witness a healthy growth momentum, benefiting companies like Viasat in the long run.

3. CommScope Holding Company, Inc. COMM has unveiled two avant-garde home networking solutions — ARRIS SURFboard G34 and G36 DOCSIS 3.1 cable modem and Wi-Fi 6 routers. The groundbreaking products have been specifically designed to power and upgrade a customer’s home network with enhanced coverage and capacity on the back of future-proof Wi-Fi 6 technology.

The innovative Home Network Management solutions help operators to minimize day-to-day operational overheads on the back of efficient subscriber experience management. The services provide a unified view of subscriber networks with consistent connectivity across business operations and create revenue streams for maximum profitability. ARRIS SURFboard G34 and G36 are two such solutions, which keep up with the modern in-home network service and technology.

4. Motorola Solutions, Inc. MSI recently secured a prime contract for an undisclosed amount from SJ AB to provide VB400 body-worn cameras for the safety and security of employees and passengers across the rail network of Sweden. With train travel gradually picking up pace, the contract will offer the requisite wherewithal to the government-owned passenger train operator that boasts 1,500 departures across 400 stations each day to ensure better passenger and employee security against any untoward incident.

The VB400 body-worn cameras are known for their ruggedness and are built to withstand adverse temperature conditions to support the rigors of the job. Designed to capture high-quality video from the wearer’s viewpoint with an intuitive recording function, it delivers transparency with an extended battery life that lasts up to 12 hours of operation. The device can be securely assigned using an employee’s ID badge at the beginning of a shift and is easily activated by the wearer, combining Bluetooth sensors with peer-assisted recording. In addition to live streaming facilities for enhanced situational awareness, the integration with Bluetooth sensors and beacons facilitates automated recording functionality.

5. Nokia Corporation NOK has launched a charging configurator microservice for its existing Nokia Converged Charging (NCC) monetization solution. Built for the dynamic needs of the 5G economy, NCC provides real-time charging capabilities that enable communications service providers (CSPs) to monetize new revenue opportunities and provide a better experience to their customers.

Converged charging brings together online and offline systems to address emerging 5G use cases. Introduced by the 3rd Generation Partnership Project, the charging function collects all network and service usage data. In April, Nokia deployed its cloud-native convergent charging solution on Amazon Web Services to accelerate CSPs migration of high-frequency charging applications to the public cloud, and to deliver the benefits of the cloud for 5G.

Price Performance

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

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

In the past five trading days, Arista has been the best performer with its stock gaining 2.1% while Bandwidth has declined the most with its stock falling 7.9%.

Over the past six months, Motorola has been the best performer with its stock appreciating 18.8% while Bandwidth has declined the most with its stock falling 51.1%.

Over the past six months, the Zacks Telecommunications Services industry has gained 2.3% and the S&P 500 has rallied 6.4%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Next in the Telecom Space?

In addition to 5G deployments and product launches, all eyes will remain glued to how the administration implements key policy changes to safeguard the interests of the industry and address the bottlenecks to spur growth.


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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

Nokia Corporation (NOK) : Free Stock Analysis Report

Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report

Viasat Inc. (VSAT) : Free Stock Analysis Report

CommScope Holding Company, Inc. (COMM) : Free Stock Analysis Report

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