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Telecom Stock Roundup: T-Mobile Sprint Merger Approved, AT&T's 5G Devices & More

Supriyo Bose

In the past five trading days, telecom stocks have steadily moved downhill as both the United States and China continued trade negotiations despite the tense undercurrents related to Huawei CFO, Meng Wanzhou. The geopolitical tussle refuses to die down any time soon as China detained a third Canadian citizen in retaliation since the issue came to limelight.

Although Meng has been granted bail after her detention and eventual arrest by the Canadian government, the matter remained a potboiler as she faced probable extradition to the United States over Huawei’s potential violations of sanctions on Iran. The Sino-American tensions elicited strong protests from China against the perceived undemocratic act and threatened to derail the 90-day truce offer to initiate negotiations related to the tariff war. However, officials from both countries have reportedly initiated trade talks to ease the tariff restrictions imposed on each other.

Meanwhile, after a series of accusations of being a security threat, Huawei has hit back at its detractors to show them proof in support of the allegations. The leading Chinese telecom manufacturer has faced roadblocks across several countries as U.S. officials reached out to allied countries to persuade them from refraining to use its equipment, denting the company’s global ambitions. It seems that Huawei will now likely aim to counter these charges as the 5G race gets heated up.

Regarding company-specific news, merger approvals, technology collaborations, product launch, earnings and strategic corporate actions took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    T-Mobile US, Inc. TMUS has received approval from the Committee on Foreign Investment in the United States for its proposed merger with Sprint Corporation S. In addition, Team Telecom, which comprises the U.S. Department of Justice, Department of Homeland Security and Department of Defense, gave its green signal to the proposed merger.

Notably, the deal will help accelerate development of faster 5G wireless networks. The New T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue leading in the 5G era. This is considered as a step forward in creating the New T-Mobile through which the company will bring robust competition to the 5G era. (Read more: T-Mobile & Sprint Secure Approval From CFIUS for Merger)

2.    Corning Incorporated GLW has inked a long-term supply contract with WaveOptics for augmented reality (AR) optics. Corning will be responsible for providing WaveOptics with ultra-flat, high-index glass wafers required for the manufacturing of waveguides — a major optical part in AR wearable devices.

Per the deal, proprietary nano-structures of WaveOptics will be imprinted on the glass wafers provided by Corning. As a matter of fact, this will facilitate the manufacturing of diffractive waveguides, capable of improving the quality of image in AR wearable devices. (Read more: Corning Enters Into Supply Contract With WaveOptics)

3.    AT&T Inc. T    recently announced that it will offer 5G devices over commercial mobile 5G network, starting Dec 21, 2018, to provide customers the first taste of the future of connectivity. With this, the company is reportedly going to be the first U.S. carrier to offer 5G devices to consumers.

The company’s 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets, while in the suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. Such a radical change in wireless technology will help create new economic opportunities and better experiences for consumers, and businesses serving customers across industries. (Read more: AT&T to Play Santa Early with 5G Device Launch in U.S.)

4.    Ciena Corporation CIEN reported healthy fourth-quarter fiscal 2018 (ended Oct 31, 2018) results wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Non-GAAP net income came in at $81 million or 53 cents per share compared with $48.5 million or 32 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents. Quarterly total revenues increased 20.8% year over year to $899.4 million, primarily due to higher product sales. The top line surpassed the Zacks Consensus Estimate of $861 million. (Read more: Ciena Q4 Earnings Beat Estimates, Revenues Rise Y/Y)

5.    Windstream Holdings, Inc. WIN has monetized some assets in order to reduce its capital expenditure and focus on core operations. These include the non-core asset sale of certain fiber assets worth $60.5 million to Arvig Enterprises, Inc. — a Minnesota-based provider of telecommunications and broadband services.

The transactions included fiber assets in Minnesota and Nebraska, totaling $49.5 million and $11 million, respectively. As part of the deal with Arvig, Windstream will continue to utilize the assets to sell its products and services across both locations. The strategic divestment was part of the company’s long-term policy to focus on its core network offerings. (Read more: Windstream Monetizes Assets to Focus on Core Operations)

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, none of the stocks recorded a gain, while Motorola Solutions, Inc. MSI was the major decliner, with its stock losing 9.4%.

Over the past six months, Verizon Communications Inc. VZ has been the best performer with its stock appreciating 12.9%, while AT&T declined the most with its shares falling 6%.

Over the past six months, the Zacks Telecommunications Services industry has gained 0.6% while the S&P 500 fell 9.1%.



What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to how the United States and China approach the Huawei issue and continue their negotiations for a long-term solution to the trade war.

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Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
 
AT&T Inc. (T) : Free Stock Analysis Report
 
Sprint Corporation (S) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
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T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
 
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