Telecom Stock Roundup: Verizon Capital View Up, US Cellular Spectrum Usage & More
Zacks Investment Research | Mar 18, 2020 10:25PM ET
Over the past five trading days, telecom stocks mirrored the broader equity indices and exhibited a roller-coaster ride. The stocks initially trended down as the coronavirus pandemic reached epic proportions, recovering remarkably as the Federal Communications Commission (FCC) invoked a comprehensive policy to handle the upsurge in broadband traffic. However, with the United States and China playing the blame game about the origin of the virus, the markets trended down fearing a ripple effect on the industry, only to reverse the trend on government promise of an economic stimulus.
In order to prevent the spread of this contagious disease in a community, governments across the globe are increasingly advocating social distancing methods. The threat of community transmission is being perceived as a potent risk factor, compelling local administration and healthcare officials to issue advisories to abstain from large social gatherings. In addition, most corporate firms are encouraging employees to work from the safety of their homes for at least the end of this month to avoid being infected through possible exposures. This, in turn, has led to an exponential demand for Internet traffic, forcing the FCC to adopt the "Keep Americans Connected Pledge."
Per the 60-day pledge, telecom service providers will not be able to terminate their service for residential or small businesses for non-payment of bills as well as waive any late payment fees due to the economic impact of the virus. At the same time, the government directive has asked telecom firms to provide access to public Wi-Fi spots to the masses to stay connected during this crisis period. Almost all leading companies joined this federal initiative, while some others like AT&T (NYSE:T) even suspended broadband data caps for household Internet plans. This probably reposed investor confidence as the markets took a breather from the freefall and scripted a brief turnaround.
The global pandemic created an unwanted reason to worry as both the United States and China blamed each other regarding the origin of the virus and the use of chemical warfare to gain a competitive edge. This is likely to dent the bonhomie and the continuing trade negotiations between the two countries, affecting bilateral trade, in particular, and the global economy as a whole, especially when the world is reeling under the deadly coronavirus attack. The telecom industry is also anticipated to feel the heat as the communist nation is considered to be one of the most important global markets. This, in turn, has triggered insecurity within the industry, inducing a downtrend.
Meanwhile, the Trump administration has initiated a fresh bribery investigation of China-based telecommunications equipment manufacturer, ZTE (HK:0763), just days after the end of its corporate probation period under the March 2017 plea agreement it had signed with the U.S. Justice Department. This is likely to further sour the strained relationship between the two countries, fueling insecurity within the broader sector.
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Regarding company-specific news, capital investment update, spectrum usage, collaboration and strategic investment primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Verizon Communications Inc. (NYSE:VZ) has raised its capital expenditure guidance for 2020 on higher planned investments to augment the infrastructure for increased 5G deployment across the United States. The company expects that the increased capital outlay would enable it to meet the higher demand for video-intensive applications and support the transition to the super-fast 5G network.
For 2020, Verizon anticipates capital expenditure of $17.5-$18.5 billion, up from $17-$18 billion expected earlier. These include the addition of small cells, MIMO antenna technology advancements and extensive fiber network connectivity for greater capacity and speed for customers. The company expects such focused infrastructure upgrade to better equip the country to fight disruptive market forces led by the coronavirus pandemic. (Read more: Original post
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