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Telecom Stock Roundup: Qualcomm Wins EU Battle, AT&T's Streaming Service & More

Supriyo Bose

In the past five trading days, telecom stocks witnessed a gradual uptrend on the anticipation of a breakthrough in the elusive trade deal between the United States and China. As the bilateral trade talks resumed on a positive note, efforts were on to iron out the key issues that derailed the negotiations before. However, both the countries remained circumspect in their approach and seemed eager to walk the extra mile to prevent any further slipups. Despite the element of caution, the thaw in the Sino-U.S. relationship is expected to buoy the industry that has borne the brunt of the tariff war. Moreover, easing of some of the trade restrictions on Chinese telecom equipment manufacturer Huawei brought a sense of relief to several U.S. suppliers, and propelled the industry as a whole.

After a two-month hiatus, U.S. trade representative Robert Lighthizer and treasury secretary Steven Mnuchin spoke with Chinese vice premier Liu He and commerce minister Zhong Shan over the phone to mark the beginning of the latest round of negotiations. Despite ‘constructive’ talks, no official details about the venue and the nature of the next level of communication were made available. Moreover, it still remained uncertain whether the two sides would resume their dialogue from the draft text agreed before the pull back or use a different starting point for the proceedings.

Furthermore, the Trump administration offered some clarity on the proposed trade relaxations against Huawei. Commerce secretary Wilbur Ross revealed that the government would issue licenses to firms that intend to sell such goods to Huawei that are not deemed to be threat to national security. Without clarifying about the exact list of goods that are likely to pass the government scrutiny as Huawei continues to be in the Entity List, the official announcement left various U.S. chipmakers unsure about their chances of making the final cut. To add to the woes, White House economic adviser Larry Kudlow revealed that the relaxation of trade restrictions was only applicable for a limited period of time.  

Meanwhile, the U.S. Federal Communications Commission was voted by a 3-2 margin to auction a key underused 2.5 GHz mid-band spectrum for 5G wireless networks. Hitherto reserved for use as the Educational Broadband Service, the spectrum was leased by Sprint Corporation for its existing 4G network and upcoming 5G deployment. The purported move is likely to offer greater flexibility to carriers for extensive 5G deployment across the country, although it was criticized to be “uninspired and stale commercial spectrum policy” that hindered the use of the spectrum by schools and other educational institutions.   

Regarding company-specific news, streaming service roll out, 5G deployment, asset sale, collaborations and organic expansion primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    Leading chip maker Qualcomm Incorporated QCOM, together with Deutsche Telekom and BMW has won an enduring legal battle over the use of 5G technology in vehicles across Europe, per Bloomberg. The triumph came after European Union member states repudiated prevailing rules that proposed WiFi-based technology for future connected cars.

Qualcomm and its business allies said that it was vital for the automotive industry to have the freedom to adopt a range of technologies for Internet-connected cars in a sector, which is estimated to be worth billions of euros a year. The comment followed a similar push by trade associations through a letter to all 28 European Union member states. (Read more: Qualcomm Wins EU Connected Car Battle, 5G Standard on the Way)
2.     AT&T Inc. T recently announced that its WarnerMedia business will roll out a streaming service in spring 2020 with an unrivaled bouquet of premium and exclusive content for an impressive direct-to-consumer experience across the age group. Dubbed HBO Max, the strategic move will equip the company to play catch-up with avant-garde media firms, like Netflix and Walt Disney, to secure a bigger pie of the streaming service market.

With its commercial debut, HBO Max will offer about 10,000 hours of premium content, leveraging an extensive collection of exclusive original programs and the most sought-after shows from WarnerMedia’s vast portfolio of beloved brands and libraries. These include the exclusive streaming rights for popular shows such as “Friends”, “The Fresh Prince of Bel Air” and “Pretty Little Liars”. In addition, it will showcase programming from Warner Bros., New Line, DC Entertainment, CNN, TNT, TBS, truTV, The CW, Turner Classic Movies, Cartoon Network, Adult Swim, Crunchyroll, Rooster Teeth and Looney Tunes. (Read more: AT&T to Roll Out HBO Max Streaming Service in Spring 2020)

3.   Sprint Corporation S has closed the asset-sale transaction of its 17-building Overland Park headquarters campus. The assets were sold to Wichita-based Occidental Management for an undisclosed amount. The strategic move comes close on the heels of a likely decision by the U.S. Department of Justice in favor of its merger with T-Mobile US, Inc. TMUS.

As part of the sale-leaseback agreement, Sprint will relocate from 11 buildings it presently occupies to four surrounding buildings on the campus. While the company’s employees are likely to be moved to the southern end of the property centered on the 6200 Sprint Parkway building, renovations for the main building are currently underway. Sprint will utilize the sale proceeds to reinvest in these four buildings for its employees. (Read more: Sprint Closes Asset Sale, Inches Closer to T-Mobile Merger)

4.     Nokia Corporation NOK has been recently selected as the sole technology provider by Taiwan Star Telecom (“TST”) — a Taiwan-based mobile network operator — for expansion of Long-Term Evolution (LTE). TST aims to augment the coverage and capacity of LTE network as well as drive subscriber growth on the back of the Finnish telecom equipment maker’s end-to-end solution.

With Nokia’s 5G-ready portfolio, TST can now expand coverage in the 900MHz/2600Mhz band across Taiwan. The company will provide the AirScale eNodeB solution that presents the Nokia AirScale Remote Radio Head along with the 7750 Mobile Gateway and Cloud Mobility Manager for expansion of the packet core. (Read more: Nokia's 5G Portfolio is Set to Modernize TST's Network)

5.     Corning Incorporated GLW has unveiled its new Automotive Glass Solutions manufacturing facility in the Hefei Xinzhan Hi-Tech Industrial Development Zone in Anhui province, China. The strategic move reiterates the specialty glass maker’s commitment to the Chinese auto market and marks its third investment in Hefei within the past four years.

The new high-volume manufacturing facility will help deliver AutoGrade Gorilla Glass parts for Automotive Interiors straight to automakers worldwide. It brings more capacity for the growth of Corning’s automotive glass solutions business. In addition, it supports the company’s goal to double sales in the automotive market as specified in Corning’s 2020-2023 Strategy and Growth Framework. (Read more: Corning's New Facility Boosts Potential to Tap Auto Market)

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, T-Mobile was the biggest gainer with its share price increasing 3.6% while Qualcomm was the biggest decliner with its stock down 3.1%.

Over the past six months, Motorola has been the best performer with its stock appreciating 32.6%, while CenturyLink was the biggest decliner with its stock down 36%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average growth of 3.8% while the S&P 500 has rallied 14.3%.

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 continue their trade negotiations and its cascading effect on the industry.

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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Nokia Corporation (NOK) : Free Stock Analysis Report
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