Telecom Stock Roundup: QCOM-ASUS Offer EXP21, VZ Settles Lawsuits & More (Revised)

U.S. telecom stocks traded relatively flat on average over the past week, as the FCC approved $1.9 billion in subsidies for the ‘rip and replace’ program of various telecommunications equipment manufactured by China-based entities deemed to be national security risks. The detailed policy guidelines, which offered a framework for subsidizing smaller carriers for concurring with government regulations, was fraught with operational risks and created an element of doubt and uncertainty within rural operators regarding the successful implementation of the same. President Biden’s executive order to promote fair competition within diverse industries further added to the cacophony, as it largely issued directives to the FCC and FTC to initiate rulemaking procedures. The apparent dearth of self-executing policy measures perhaps stopped the industry from going gung-ho about this federal initiative.

In order to be eligible for receiving federal subsidies for replacing equipment from China-based telecom companies, wireless operators should have served a population of 10 million users or less. The replaceable gears should have been obtained from banned entities like Huawei or ZTE (HK:0763) prior to Jun 30, 2020. About 50 small carriers and rural operators are likely to fit the bill and unless these firms are duly reimbursed for replacing gear that are nearly 30-35% cheaper than other available variants in the market, they could go bankrupt for purchasing pricier alternatives to maintain their service quality. This, in turn, has significantly increased the operational risks for the effective execution of the subsidy program.

Among the various provisions within Biden’s executive order, the telecom industry is likely to be more affected by three separate directives. These include an FCC-directive to reinstate Obama-era net neutrality laws, an order to monitor and report broadband price and subscription rates to FCC for dissemination to consumers, and an FTC-directive to provide consumers and third-parties a “right to repair” their devices without going through the device manufacturer. Although the directives are primarily aimed for the larger benefit, the rulemaking is likely to be a time-consuming affair with possibilities of being challenged in court, further delaying the process of implementation. Moreover, with the five-member FCC deadlocked with two Republican and two Democratic member representations, the Order is likely to be delayed until the fifth member is nominated and confirmed.

Regarding company-specific news, product launch, patent settlement, guidance revision, network expansion and acquisition primarily took center stage over the past five trading days.h3 Recap of the Week’s Most Important Stories/h3

1. At a time when the broader technology sector is reeling under acute global chip shortage, Qualcomm Incorporated acquire Openpath Security Inc. for an undisclosed amount. The acquisition will enable Motorola to combine its market-leading video security portfolio with advanced access control features.

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Openpath’s capabilities will allow Motorola to augment its footprint by supporting enterprise customers with state-of-the-art security solutions. Motorola is committed to the integration of security technologies that help organizations enhance safety.

The following table shows the price movement of some of the major telecom stocks over the past week and six months.