Telecom Stock Roundup: AT&T Soothes Investors, Nokia Inks 5G Deal & More

The past five trading days saw continuing bloodbath for telecom stocks as markets went into a tailspin on apprehensions of a global economic slowdown owing to the coronavirus. Despite strict quarantine steps and other safety measures, there seemed to be no respite from the deadly disease, as the industry battled a ‘supply shock’ caused by factory shutdowns and travel restrictions.

With the death toll in the United States swelling to 36 amid 1,215 confirmed or presumptive positive cases, the markets appeared shaky as more and more investors began parking their money in the safe haven of government debt. The pandemic has disrupted normal business operations and supply-chain mechanisms of various telecom companies as they preferred to exercise caution and put on hold their delivery schedules to and from China and other countries like South Korea until the health risks are neutralized. This, in turn, has triggered insecurity within the industry, inducing a downtrend.

Meanwhile, President Trump has signed the Secure and Trusted Communications Networks Act of 2019. The bill includes $1 billion in funding to help smaller rural telecoms to “rip and replace” existing equipment from manufacturers like Huawei that are deemed to be a threat to national security interests. The lawmakers are further planning to introduce a bill to prevent Huawei from accessing U.S. banks for certain transactions, thereby making it extremely difficult for the firm to carry out most dollar-designated business dealings. This is likely to take a heavy toll on Huawei as it struggles with the coronavirus-led demand and supply constraints.

The Trump administration has also postponed, for the second time in a row, a scheduled meeting with the top officials in China regarding potential new U.S. restrictions on sales of technology to Huawei due to the virus outbreak. However, the government has offered a reprieve to the beleaguered telecommunication equipment manufacturer by extending a license till May 15, which allows U.S. firms to trade with it. This will likely allow various smaller rural firms that depend on Huawei to trade with it until they totally get rid of its equipment from their networks.

In another notable development, the Federal Communications Commission (FCC) has reportedly raised more than $4.5 billion for the U.S. Treasury through the successful conclusion of Auction 103. Arguably the largest spectrum auction in the U.S. history, it raised more than $7.5 billion in proceeds as telecom providers bid for spectrum licenses in the upper 37 GHz, 39 GHz and 47 GHz bands. Through the auction, FCC opened up about 3,400 MHz of millimeter-wave spectrum for telecom providers for increased 5G deployment.

Regarding company-specific news, business update, collaboration, dividend hike, carbon footprint and earnings primarily took the center stage over the past five trading days.

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Recap of the Week’s Most Important Stories

1. AT&T Inc. (NYSE:T) recently debriefed investors about the progress of the company on various metrics, while offering an update on the probable impact of the deadly coronavirus outbreak on its performance.

Allaying investors’ fears, John Stephens, senior executive vice president and chief financial officer, observed that the company expects to witness no significant impact from the coronavirus outbreak. The company remains well poised to continue its 5G momentum as it brings the tally of 5G coverage to 80 cities across the nation to date. Stephens further envisions significant growth opportunities for the company with extensive fiber connectivity and bundled offerings for businesses and consumers. (Read more: Original post

Written By: Zacks Investment Research