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Telecom Stock Roundup: AT&T to Shelve Data Sharing, Qualcomm's Defense & More

Supriyo Bose

In the past five trading days, telecom stocks had a roller-coaster ride as optimism over U.S.-China trade negotiations was negated by market uncertainty triggered by a prolonged partial shutdown of the government, and federal investigation of criminal charges against Huawei. The spiraling issue could further derail the bilateral trade talks between U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu scheduled later this month.

A flurry of decisive steps from China to ease some bottlenecks in the bilateral trade relations and resumption of trade negotiations seemed to offer respite to the beleaguered sector that bore the brunt of the bitter trade war. However, partial shutdown by various federal agencies, for an all-time record of 26 days and counting, dented market euphoria as unavailability of funds by the FCC affected the speedy deployment of 5G technologies. The shutdown hampered FCC’s equipment authorization process, compounding industry fears that the impasse could jeopardize the country’s edge in the upcoming 5G boom.

To add to the woes, the U.S. Justice Department has reportedly decided to pursue a criminal case against leading Chinese smartphone manufacturer Huawei for alleged trade secret theft. The latest indictment traces its roots to a civil suit filed by T-Mobile US, Inc. in Seattle District Court in 2014, in which it accused Huawei of stealing trade secrets at the behest of R&D team based in China. Although the case was settled with a $4.8 million compensation award to T-Mobile in 2017, it seems that the Trump administration will leave no stone unturned to ban China’s Huawei and ZTE from the country. A bipartisan group of U.S. lawmakers has already introduced bills in this regard.

Meanwhile, the tense undercurrents related to Huawei CFO, Meng Wanzhou and her probable extradition to the United States continued to haunt both the countries. It remains to be seen how the trial pans out with incriminating documents revealing the suspected ties of Huawei with two obscure companies, using which Meng allegedly deceived international banks into clearing transactions (worth millions of dollars) with Iran despite economic sanctions.

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

Recap of the Week’s Most Important Stories

1.    Over the past few quarters, Ericsson ERIC has been diligently focusing on simplifying and stabilizing its businesses to generate a steady revenue stream and improve margins. Despite some definite improvements across most segments, the company has faced roadblocks in the Digital Services segment within the Business Support System (BSS) area. Ericsson now intends to reshape its BSS strategy and fine tune its business model to stem the losses in order to attain its profitability target for 2020.

Although the company was able to generate lasting efficiency improvement in Digital Services by addressing half of the identified 45 critical and non-strategic projects and implementing strategic cost cuts, it failed to script a complete turnaround. This affected its segment margin and forced management to revert to the tried and tested business model within the BSS division. (Read more: Ericsson to Reshape Digital Services Strategy to Stem Losses)

2.    Amid bad press related to alleged misuse of location services data, AT&T Inc. T has decided to altogether cease data sharing activities with third-party vendors from March this year. The company expects the strategic move to prevent customers from being adversely affected in the future.

As AT&T’s name cropped up in the investigation, management stated that fraudulent use of sensitive customer data was against corporate policies, “completely ending location aggregator work” from second-quarter 2019 onward. (Read more: AT&T to Shelve Third-Party Location Service Data Sharing)

3.    In the U.S. Federal Trade Commission's antitrust trial for monopolistic trade practices, QUALCOMM Incorporated QCOM recently tried to defend itself using the ‘intellectual property rights’ card. As lawyers from both the government and the company put forth their arguments before the U.S. District Judge Lucy Koh, the 10- day non-jury trial appears to be in a critical stage.

Qualcomm CEO Steve Mollenkopf testified before the court that purchasing a license was necessary for phone manufacturers as merely buying a chip did not cover all its IP rights. Consequently, he urged the judge not to view the licensing agreement, which manufacturers needed to comply with, in isolation, and that the entire security structure was required to make the whole system work. (Read more: Qualcomm Uses 'IP Rights' Card for Defense in FTC Trial)

4.    Continuing its rich legacy of developing pioneering products for the various industry verticals, Corning Incorporated GLW has unveiled the industry’s first automotive glass solutions that deliver impeccable performance and superior system economics. The products, showcased to the public for the first time in 2019 Consumer Electronics Show in Las Vegas, attracted great interest from prospective manufacturers.

In order to tap the huge market potential for connected and immersive driver experience in the cockpit, Corning developed two AutoGrade cover glass solutions for auto interiors — one in 2D and the other in 3D format. Both the product variants are subjected to rigorous quality checks and trial runs for the highest reliability performance. These include industry-approved reliability tests using Corning`s system-level design guidelines to have the perfect blend of authentic feel, superior durability and advanced optics. (Read more: Corning Offers Pioneering Automotive Glass Solutions)

5.    Motorola Solutions, Inc. MSI recently announced that it has introduced the Si200 body-worn camera to facilitate agencies in investigation while providing footage of incidents.

Notably, the Si200 body-worn camera captures high-definition video and boasts additional advanced capabilities, helping integration across the public safety workflow. It combines with CommandCentral Vault — Motorola’s digital evidence management solution — that enables investigating agencies to manage content from in-field capture to judicial process under an integrated platform. (Read more: Motorola Unveils Si200 Body-Worn Camera for Digital Evidence)

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, SBA Communications Corporation was the biggest gainer with its share price increasing 4.5% while Sprint Corporation declined the most with its stock losing 3.5%.

Over the past six months, Verizon Communications Inc. has been the best performer with its stock appreciating 10.4% while Harris Corporation declined the most with its shares falling 11.4%.

Over the past six months, the Zacks Telecommunications Services industry has inched up 1.8% while the S&P 500 fell 7.2%.

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 continue their negotiations for a long-term solution to the trade war amid the backdrop of Huawei’s criminal investigation process.

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