Telecom Stock Roundup: T-Mobile, Corning Q2 Earnings Increase Y/Y, & More

In the past five trading days, telecom stocks initially witnessed a steep ascent followed by a relatively flat trajectory, culminating into an eventful week that is likely to reshape the industry dynamics. A historic approval for the industry consolidation was the cynosure of the week. Solid quarterly performance on average lent stability, with the industry appearing resilient to shake off the regulatory threats and trade impediments. The Sino-U.S. high-level officials also held ‘constructive’ face-to-face discussions on the various stumbling blocks affecting the bilateral trade and pledged to continue their negotiations next month.

After a prolonged stand-off, the U.S. Department of Justice finally gave green signal for the merger of T-Mobile US (NASDAQ:TMUS), Inc. (NYSE:S) with Sprint Corp. (NYSE:S) – the third and the fourth-largest wireless companies in the country. Allaying antitrust concerns, the authorities observed that the merger would create an entity that would thwart the dominance of China in the 5G market and benefit the larger community with superior rural broadband coverage. In addition, a $5-billion deal with Dish Network for divesting Sprint’s prepaid wireless businesses, including Boost Mobile, and some of its spectrum cleared the decks for the formation of a new entity in the wireless industry.

The all-stock merger will help accelerate development of faster 5G wireless networks driven by operational synergies and extended customer base on shared infrastructure assets. The New T-Mobile will have a strong closing balance sheet and a fully funded business plan with a strong foundation of secured investment grade debt at close. The combined entity will be a force to reckon with in the U.S. wireless, video and broadband industries, boasting a network capacity for a nationwide 5G network deployment. The agreement also establishes Dish as a disruptive force in the wireless industry, redefining the broader industry metrics.

Bilateral trade negotiations moved at a sluggish pace as U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin traveled to Shanghai, China, for a high-level meeting with Vice Premier Liu He. Despite ‘constructive’ talks regarding intellectual property theft, forced transfer of foreign technology, large-scale subsidies, agriculture, trade deficit, and enforcement issues, no major breakthrough was realized. However, the officials decided to meet again in September in Washington to reach a deal. No further clarity was offered about the various trade restrictions that are still in place, although U.S. Commerce Secretary Wilbur Ross hinted that the Trump administration could come up with a decision next week regarding the issue of licenses to sell telecom equipment to Chinese telecom giant Huawei.

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Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. T-Mobile reported solid second-quarter 2019 results, with record low branded postpaid phone churn and record high service revenues. The company continues to successfully translate customer growth into industry-leading service revenue growth. Both the top line and the bottom line increased on a year-over-year basis.

Adjusted earnings per share came in at $1.29 compared with 92 cents reported in the year-ago quarter, beating the Zacks Consensus Estimate by 30 cents. Quarterly total revenues increased 3.9% year over year to $10,979 million driven by growth in service revenues. However, the momentum was partly offset by decrease in equipment revenues. The top line lagged the consensus estimate of $11,139 million. (Read more: Zacks Investment Research

Written By: Zacks Investment Research