The U.S. telecom stocks mirrored the benchmark S&P index in the past week and witnessed a gradual uptrend, as the government continued its relentless pursuit to keep China-backed firms out of its telecom network in order to lend support to domestic telecommunication companies. The stonewalling effort is also gaining steam in other allied countries as diplomatic channels have managed to convince certain nations to reconsider granting access to China-based telecommunications equipment provider, Huawei, for 5G deployment. The political slugfest for 5G supremacy in the backdrop dovetailed with the administrative efforts to set guardrails and legislations to safeguard the interests of domestic firms and provide confidence to the industry.
The concerted efforts appear to be a strategic ploy by the Trump administration to accelerate technology decoupling with China and encourage domestic firms to reorganize their global production network away from the communist nation. Responding to the gravity of the situation, Pacific Networks Corp. and its wholly-owned subsidiary ComNet (USA) LLC – two state-controlled Chinese telecommunications firms – have urged the Federal Communications Commission (FCC) not to shut down its U.S. operations. In a formal FCC filing, the firms argued that the dearth of any enforcement action in their two-decade-old operating history indicated that no such actions were undertaken at the behest of the China government that could compromise U.S. national security.
Meanwhile, the U.K. government is reportedly reconsidering its decision to utilize Huawei equipment for its 5G network, despite giving it approval earlier for access to certain non-core areas. The change of stance seems to be a fallout of the Chinese-government backed controversial Hong Kong security law that evoked sharp criticism from all over the world, including the British Prime Minister who threatened to change its immigration laws if the anti-sedition law was imposed. The draconian law is mooted to be a ploy to stamp out anti-China protests and undermine the city’s autonomy under the “one country, two systems” framework, curbing overall freedom and democracy.
Notably, leading Canadian telecom firms have also decided to utilize telecommunications equipment from Nordic firms like Nokia and Ericsson instead of Huawei. The U-turn by the carriers is probably triggered by the evolving political landscape as relations between Canada and China turned sour with a go-ahead in the extradition case of Meng Wanzhou, the CFO of Huawei. Although the legal battle is likely to continue, the verdict has set the ball rolling for her extradition to the United States to face trial against various charges of fraudulence.
Regarding company-specific news, quarterly earnings, strategic deals and deployments primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Despite impediments like the coronavirus-induced turmoil and social unrest, T-Mobile US Inc. TMUS has achieved a historic milestone by offering 5G services across all 50 states in the country. The feat showcases the inherent strength of its resilient business model amid a competitive and cut-throat business environment.
The company recently formed a strategic collaboration with General Communication Inc., a telecommunications firm operating in Alaska, to provide 5G network connectivity in Anchorage — the largest city in the state. With this, T-Mobile reportedly became the only wireless carrier to offer 5G services throughout the country either on its own or through partner coverage. The win-win partnership further enabled General Communication customers to enjoy roaming access to T-Mobile’s nationwide 5G network spanning one million square miles across nearly 6,000 cities and towns.
2. TELUS Corporation TU has announced that it has selected telecommunications equipment from Nokia and Ericsson to deploy 5G services across its network. Notably, another Canadian carrier BCE Inc. also snubbed China-based telecom equipment provider, Huawei, in favor of these Nordic firms.
With state-of-the-art equipment from Nokia and Ericsson, TELUS aims to leapfrog in the 5G race and drive digital development across industries, backed by super-fast, scalable and low-latency network capabilities. This, in turn, is likely to spur economic growth as the country aims to navigate through the coronavirus-induced turmoil.
3. Verizon Communications Inc. VZ has announced that San Diego is the 35th city to have its 5G Ultra Wideband mobility service. The New York-based telecom giant’s service, which involves high-speed, low-latency and expanded coverage, is available with 5G-enabled devices.
Verizon’s 5G mobility service offers an unmatched experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of the next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer; end-to-end deep fiber resources; and the ability to deploy a large number of small cells.
4. Ericsson ERIC recently announced its collaboration with Hong Kong’s leading communications service provider — SmarTone — for the deployment of 5G connectivity by leveraging the Spectrum Sharing technology. Markedly, this will enable Ericsson to capitalize on its best-in-class capabilities in the wireless core services platform, thereby strengthening its position in Asian markets.
Ericsson’s Spectrum Sharing technology promotes cost-efficient and wide-area 5G coverage, which transforms the end-user experience. This technology enables the deployment of both 4G and 5G network on the same radio through a software upgrade. Impressively, this dynamic solution is reckoned to be the most economically feasible way to deploy 5G on existing bands.
5. CenturyLink, Inc. CTL has completed the construction of a fiber-optic project that was started in 2019, connecting more than 14,000 homes in Boulder, CO, to gigabit Internet speeds. The project provides fast and reliable Fiber-to-the-Home (FTTH) Internet service with gigabit speeds to residents and enterprises.
Fiber optic-based Internet services have been developed by connecting fiber optic cable directly to homes and businesses using FTTH technology. CenturyLink’s fiber Internet services include quick upload and download speeds as well as the ability to support multiple users on multiple devices at the same time.
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, Motorola has been the best performer with its stock appreciating 9.4%, while AT&T has been the only decliner with its stock decreasing 1.1%.
Over the past six months, T-Mobile has been the best performer with its stock appreciating 24%, while CenturyLink was the biggest decliner with its stock falling 33.3%.
Over the past six months, the Zacks Telecommunications Services industry declined 9%, while the S&P 500 recorded an average loss of 1.2%.
What’s Next in the Telecom Space?
In addition to product launches, deals and 5G deployments, all eyes will remain glued to how the administration attempts to devise pre-emptive steps to thwart Chinese dominance in 5G while safeguarding interests of domestic firms.
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