Telecom Stock Roundup: Sprint To Divest Boost, Nokia's 5G Deals & More
Zacks Investment Research | Jun 06, 2019 07:59AM ET
In the past five trading days, the initial downtrend of the telecom stocks was replaced by a steep ascent in the latter half of the week as the firms seemed to shake off the tariff concerns for a renewed focus on 5G deployment across the country. With no visible respite from the tariff war, the industry is probably bracing for a long battle of trade restrictions by fortifying its 5G resources and lapping up spectrum from government auctions.
Leading firms like AT&T and T-Mobile together have committed to spend nearly $1.8 billion on high-frequency spectrum for 5G networks in a Federal Communications Commission auction, with the former winning bids in the 24GHz auction worth $982.5 million for 831 licenses and the latter snapping bids worth $803.2 million for 1,346 licenses. Several other firms are also in the fray with U.S. Cellular pledging to spend $126.6 million for 282 licenses and Windstream likely spending $20.4 million for 116 licenses.
The strategic move seems to be the call of the hour to allay the element of uncertainty creeping within the rank and files of the telecom sector. Despite the Trump administration temporarily easing some trade restrictions on Huawei, several European firms followed suit and have either suspended their deals or cancelled pre-orders with the Chinese smartphone manufacturer. This has apparently polarized the industry into two distinct halves, virtually triggering intense technology warfare between the two superpowers of the global economy.
On the other hand, China has also scaled up the pace for 5G rollouts in the country by offering commercial licenses to China Telecom, China Mobile, China Unicom and China Radio and Television. Experts widely view this counter move as a possible ploy by the communist nation to thwart the competitive advantage of U.S. firms in the 5G race. Amid the hullabaloo, Huawei has reportedly signed a deal with Russian telecom company MTS to develop a 5G network in the country over the next year. This has given a shot in the arm to the beleaguered Chinese smartphone manufacturer.
Meanwhile, several rural telecom carriers continued to show their resentment about the trade restrictions on cheap Huawei equipment. The ban has effectively forced various small and independently-owned telecom operators to replace the existing equipment with other relatively expensive alternatives, thereby increasing their operating expenses, or risk withdrawal of support services from Huawei. This, in turn, has jeopardized the sustainability of various firms, putting thousands of jobs at risk. The U.S. lawmakers have already introduced a bill to provide up to $700 million to the telecom carriers, particularly in rural areas, to avert such crisis.
Regarding company-specific news, divestment decisions, 5G deals and strategic collaboration primarily took the center stage over the past five trading days.
Get The News You Want
Recap of the Week’s Most Important Stories
1. According to industry grapevines, T-Mobile US Inc. (NYSE:S) and Sprint Corporation’s (NYSE:S) strategic decision to divest prepaid wireless service — Boost — to gain regulatory approvals for their merger has stirred up interest of potential suitors. The latest firm that reportedly entered into the buyout fray is Amazon.com Inc (NASDAQ:AMZN). Although spokespersons from the related entities have declined to comment on the buzz, Amazon’s penchant for unconventional business ventures gives us enough reason to take note of such developments.
In order to win over the anti-trust rules and secure regulatory approvals, the companies decided to divest Sprint’s prepaid wireless brand Boost. This is not likely to harm the combined company much as T-Mobile has a successful prepaid brand — Metro (formerly Metro PCS). Metro reportedly has 21.1 million prepaid customers while its biggest competitor AT&T Inc. (NYSE:T) has 17.2 million. (Read more: Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.