Telecom Stock Roundup: Verizon's Environmental Pledge, Ericsson's R&D Push & More

In the past five trading days, telecom stocks trended up, thanks to the “Phase One” deal between the United States and China, which put to rest the 18-month old trade war that rattled the global markets. With a ceasefire in the Middle East and healthy economic mood, largely driven by low interest rates, robust job market and solid consumer spending, it appears that the worst is almost over for the beleaguered industry, at least for the time being.

The onus has now shifted to the enforcement mechanisms of the trade deal, failing which, both sides risk conflict escalation with re-imposition of tariffs. The contention issues pertaining to protection from intellectual property violations, forced technology transfer and subsidization by China pose imminent challenges. In addition, China’s pledge to purchase $200 billion of U.S. goods over the next two years, including $40-$50 billion of agricultural products each year, remains a daunting task.

Nonetheless, the deal has facilitated greater protection for U.S. tech firms, including preliminary injunctions and expanded legal recourse for trade secret theft, and lesser cases of forced technology transfers. Although the broader technology sector (of which telecom is part) is likely to benefit in the short term with easier operating conditions in China, this might to lead to a technology arms race between the two countries in the long run. While China is expediting efforts to develop indigenous semiconductors, driverless cars, telecom and other products to reduce its reliance on U.S. technologies, the Trump administration is restricting sales of U.S. technology-based products to the communist nation, hurting the overall industry.

Meanwhile, U.S. senators are deliberating the need for a huge human capital for accelerating the 5G deployment across the country to thwart the increasing stranglehold of Huawei in Europe as Germany and Britain ponder giving approval to the China-based telecom equipment manufacturer. They anticipated additional workforce requirement to lay fiber, install radios and deploy other essential equipment as 5G signal typically requires smaller cell stations every several hundred feet as it can only travel short distances, unlike 4G networks. The battle lines for 5G dominance is likely to be redrawn as Huawei CFO is fighting the U.S. extradition case in Canada, with a probable escalation in other prohibitory orders.

Regarding company-specific news, environmental commitments, new R&D center setups, strategic collaborations and trial approval took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Advocating climate change, Verizon Communications Inc.’s (NYSE:VZ) , chairman & CEO, Hans Vestberg, has reaffirmed the company’s commitment to end carbon emissions in its operations by 2035.

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Verizon plans to achieve this goal by reducing emissions, migrating energy procurement in favor of clean energy and carbon offsets. Its connected solutions help customers to save energy and reduce their carbon emissions. The company is working toward sourcing renewable energy equivalent to 50% of its annual electricity consumption by 2025. (Read more: Zacks Investment Research

Written By: Zacks Investment Research