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Telecom Stock Roundup: AT&T Offers Business Update, Nokia-TELUS Deal Inked & More

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Supriyo Bose
·7 min read
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The U.S. telecom stocks witnessed a relatively flat trajectory for the most part of the past week as healthy progress in the experimental COVID-19 vaccines was offset by a continued surge in coronavirus cases. However, a late surge at the end of the week was propelled by the news of the transition of the President-elect to the White House, with the industry pinning hopes on an updated policy framework to tide over the gloom and doom of the virus outbreak. The trend also mirrored the broader benchmark indices that possibly factored in the likely nomination of former Federal Reserve Chair Janet Yellen as the incumbent Treasury Secretary for the sudden rise after a sedate start to the week.   

With water-tight legislations and sound policy guidelines, the Biden administration is expected to safeguard the interests of domestic telecommunications firms and maintain a tight leash on China-based entities to thwart data intrusion and cyber espionage. Resonating such a strict government stance, the FCC has discarded the petition of ZTE Corp. to reconsider the decision of designating it as a threat to national security interests and has affirmed it as a potential risk to the U.S. communications network. The government also granted Chinese firm, ByteDance, which owns TikTok, a new seven-day extension to divest the short video-sharing app on perceived threats to national security. The fresh deadline to broker a deal for the proposed divesture of TikTok is set to expire on Dec 4, although other restrictions imposed by the U.S. Commerce Department are stayed by the federal courts.

Meanwhile, the United Kingdom has introduced a stringent law that could effectively impose a fine of £100,000 a day on telecom operators that use banned equipment from Huawei. The Telecommunications (Security) Bill aims to replicate the tough U.S. sanctions on Huawei and boost U.K. security standards by eliminating high-risk vendors from its telecom network.

Regarding company-specific news, management updates, strategic collaborations, deals, odd earnings releases and product launches primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     The top management from AT&T Inc. T has debriefed investors about its progress on various operational metrics to allay the fears, as a fresh wave of coronavirus outbreak appeared to cast a gloom. John Stephens, the senior executive vice president and chief financial officer of the company, also shed some light on its continued business transformation initiatives to stay relevant to customers amid the challenging macroeconomic environment.

With a customer-centric business model, AT&T is witnessing healthy momentum in its postpaid wireless business with a lower churn rate and increased adoption of higher-tier unlimited plans. The company continues to focus on seamless broadband connectivity for unhindered access to streaming content from HBO Max with healthy investments in 5G and fiber-optic infrastructure. AT&T also added to the festive quotient by announcing its upcoming Wonder Woman 1984 movie release simultaneously across HBO Max and movie theatres on Christmas.
2.    Nokia Corporation NOK has secured a contract for an undisclosed amount to deploy critical 5G infrastructure solutions for TELUS Corporation. In addition to improved network performance, the solutions are likely to expand the 5G service offerings of the Canadian operator and strengthen its leading market position.

In particular, Nokia will deploy subscriber data management, policy controller, NetAct network management, LTE indoor picocells and IP edge routers for TELUS. The state-of-the-art telecommunications equipment from Nokia will enable TELUS to cost-effectively manage its network with minimal human intervention for ultra-low network latency, reliability and security features. It is also likely to enable the carrier to establish a cloud-native network architecture for faster and efficient delivery of services across key verticals, as it aims to leapfrog in the 5G race and drive digital development.

3.     Woodward, Inc. WWD reported relatively modest fourth-quarter fiscal 2020 results, with net earnings and sales declining on a year-over-year basis due to severe volatility in its markets stemming from the COVID-19 pandemic. However, both top and bottom lines exceeded the respective Zacks Consensus Estimate, backed by diligent execution of operational plans and prudent capital management.

Excluding non-recurring items, adjusted net earnings for the reported quarter declined to $48.1 million or 75 cents per share from $78.7 million or $1.22 in the prior-year quarter. Nevertheless, the bottom line beat the Zacks Consensus Estimate by 21 cents. Net sales in the fiscal fourth quarter fell 27.9% year over year to $531.3 million due to lower sales in the Aerospace and Industrial segments on account of coronavirus adversities and lower oil prices. Nevertheless, the top line surpassed the consensus mark of $520 million.

4.      Reinforcing its long-standing partnership, Juniper Networks, Inc. JNPR has teamed up with edge cloud services provider, Zenlayer, to upgrade the latter’s datacenter network while establishing an enhanced global networking infrastructure. The alliance will help Zenlayer support the growing adoption of automated and AI-driven innovation across its network with greater efficiency on the back of Juniper’s avant-garde solutions.

These advanced solutions are known for reducing network transmission delays with improved customer experience through the software-defined platforms. The concerned agreement, which is believed to be a significant win, highlights Juniper’s efforts in building out a streamlined infrastructure, especially at a time when majority of the network operators are migrating to automated connectivity solutions.  

5.      CommScope Holding Company, Inc. COMM has unveiled an advanced version of the SURFboard DOCSIS (Data Over Cable Service Interface Specification) modem to establish a streamlined networking infrastructure for an enhanced customer experience.

Dubbed ARRIS SURFboard S33 DOCSIS 3.1 multi-Gigabit cable modem, the latest entrant to the SURFboard family provides improved connectivity on the back of best-in-class home network management. Markedly, this product launch is likely to help customers scale up their network capacity while complementing the company’s strategic efforts to support wireline and wireless network convergence for a future-proof network framework.

Price Performance

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, Lumen Technologies has been the best performer with its stock gaining 7.7%, while Qualcomm was the biggest decliner with its stock falling 2.1%.

Over the past six months, Qualcomm has been the best performer with its stock appreciating 45.7%, while Juniper was the biggest decliner with its stock falling 8.4%.

Over the past six months, the Zacks Telecommunications Services industry has rallied 7.9% on average and the S&P 500 has gained 19.6%.

What’s Next in the Telecom Space?

In addition to the 5G deployments and product launches, all eyes will remain glued to how the administration continues to safeguard the interests of domestic telecom firms from perceived Chinese threats as the transition to the new President progresses.

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AT&T Inc. (T) : Free Stock Analysis Report
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