Telecom Stock Roundup: AT&T To Divest Assets, Ericsson's Rural Support & More
Zacks Investment Research | Oct 16, 2019 10:12PM ET
In the past five trading days, telecom stocks witnessed an uptrend as the United States and China reached a preliminary trade deal, representing a major breakthrough in the 18-month old trade war that hurt the economies of both nations. The partial trade accord is likely to ease the bilateral tensions between President Trump and his Chinese counterpart, who are expected to formally sign an agreement as early as next month. Although the specifics of the “Phase One” deal is yet to be chalked out in detail, the positive vibes have led to wide expectations of improving market conditions.
Per the mutually agreeable trade accord, China will significantly step up its purchase of U.S. farm products such as soybeans, pork and other agricultural commodities to the tune of $40-$50 billion a year. In addition, the communist nation has agreed to take certain measures related to IP rights and award concessions pertaining to financial services and currency. In return, the United States has agreed to defer a tariff hike on $250 billion worth of Chinese imports, which was slated to go into effect on Oct 15. However, the U.S. government remained non-committal about the proposed tariffs on $156 billion worth of Chinese import basket that are scheduled to come into force from Dec 15.
So far, the trade agreement is in principle and not put on paper. Contingency to the success of this deal, the Trump administration intends to discuss the issues related to the trade restrictions imposed on Chinese telecom equipment manufacturer Huawei in “Phase Two”. Other contentious issues related to structural changes in the Chinese trading and economic system to eradicate alleged IP theft, forced technology transfer and state-sponsored subsidies are also likely to be discussed in the next stage of the negotiation. Meanwhile, Trump has reportedly given the green light to the issue of licenses to U.S. firms for trading with Huawei. This is likely to give a much-needed boost to the beleaguered industry and provide an impetus to restore normal businesses with China – one of its most important global markets.
Regarding company-specific news, divestment, footprint expansion, technology acquisition and network deployment primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. In order to trim its huge debt profile, AT&T Inc. (NYSE:T) has communicated plans to sell its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America.
The transaction comprises network assets, including spectrum, real estate and leases. It also involves customers, including 1.1 million wireless subscribers. The move is an outcome of the company’s ongoing strategic review of its balance sheet and assets to identify opportunities for monetization. Upon closure, about 1,300 AT&T employees will move to Liberty Latin America. (Read more: Original post
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