Telecom Stock Roundup: T-Mobile Extends 5G Footprint, Arista's Buyout & More
The U.S. telecom stocks have witnessed a placid run in the past week as federal efforts to ban Chinese apps WeChat and TikTok faced roadblocks from district courts with two judges seeking further evidence from the government to enforce the ban. The uncertain environment appeared to take the steam off the telecom sector as the Trump administration remained firm in its stance to remove Chinese apps from U.S. mobile app marketplaces. The government is also aiming to prevent Chinese hardware manufacturers from pre-installing popular U.S. apps on their devices.
The U.S. Commerce Department sought to ban WeChat as it was allegedly being used as cyber espionage tool to gain access to sensitive U.S. data. However, U.S. Magistrate Judge Laurel Beeler refuted the charges and delayed the restrictions citing users’ First Amendment rights. In another judgement, District Judge Carl Nichols allowed U.S. app stores to continue offering TikTok for download amid ongoing negotiations with Oracle and Walmart for the formation of a new entity TikTok Global for overseeing its local operations.
Although the situation is considerably fluid, the deal is not likely to get the President’s approval if the data and national security concerns raised by Washington are not properly addressed. Notably, Oracle is slated to gain full access to TikTok’s source code and updates. This is likely to serve as a deterrent against any attempt by the Chinese parent firm to access private sensitive data of the video sharing app’s U.S. users. However, TikTok is likely to retain the algorithmic models that remain at its core of content recommendation.
Meanwhile, the FCC has adopted a new set of rules for foreign companies seeking to operate in the U.S. telecom market. This is likely to improve the transparency and timeliness of the cross-agency review process for applications for licenses with definite timeframes for completion of the process. The changes formalize the long-standing review process informally known as Team Telecom review and requires applicants to answer a standardized set of national security and law enforcement questions. In addition to a 120-day initial review period followed by a discretionary 90-day additional assessment, applicants are required to make particular certifications to help protect national security and law enforcement interests.
Regarding company-specific news, 5G deployment, acquisition, case re-hearing plea and product launches took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. T-Mobile US, Inc. TMUS has augmented its 5G footprint in the mid-band spectrum by introducing 5G services in 121 new cities and towns across the United States. With this, the company has achieved live 5G coverage in about 210 cities and towns. It aims to considerably increase the tally by the end of the year.
The mid-band spectrum (2.5 GHz) of T-Mobile delivers super-fast speed averaging around 300 Mbps with peak speed of up to 1 gigabit-per-second. This is reportedly about 7.5x faster than the existing LTE networks. The mid-band spectrum is highly coveted by telecom firms as it allows longer ranges of electromagnetic waves and better penetration of signals through walls.
2. Arista Networks, Inc. ANET recently inked a definitive agreement to acquire Awake Security for an undisclosed amount to augment customers’ proactive visibility and threat detection capabilities across the cloud network traffic. The buyout is likely to add significant value to Arista and complement many of its Endpoint Detection Response offerings.
The transaction brings together two leading technology firms with complete situational awareness of customers’ digital assets along with the ability to fully assess and respond to critical threats. In addition to distinct synergies in technology and market opportunity, the deal is based on commonalities in values, culture and philosophies, and is likely to deliver secure cloud networking experience for clients.
3. It appears that there is no respite for Qualcomm Incorporated QCOM as the U.S. Federal Trade Commission has filed a motion before the court to seek a re-hearing against the favorable antitrust ruling received by the chipmaker. The appeal has also cast a doubt over the higher court’s decision to vacate an injunction against Qualcomm that mandated the chipmaker to change its intellectual property practices and redo its licensing deals with firms like Apple Inc. and Samsung Electronics Co.
Unsatisfied with the previous verdict, the FTC decided to consider its legal options and requested the appeals court to reconsider its decision. The FTC is seeking an "en banc" hearing before an 11-judge panel as it aims to build a case against a likely ‘legal error’ by the three-judge panel of the appeals court that had issued the judgement.
4. Verizon Communications Inc. VZ is launching 5G Home Internet in Minneapolis and Saint Paul, bringing the much acclaimed service to eight cities. This service is currently available in select areas of Chicago, Detroit, Sacramento, Los Angeles, Houston and Indianapolis. The telecom giant intends to cover at least 10 cities by the end of 2020.
Featuring a newly designed hardware, the device comes with a self-setup that uses augmented reality. This makes it an even more compelling choice, particularly for those who are working from home or powering a smart home. Verizon has been building its 5G Ultra Wideband network to enable innovations that will support the changing behavior of customers.
5. Juniper Networks, Inc. JNPR has inked an agreement to acquire Netrounds, a network testing and monitoring expert. The Sunnyvale, CA-based company intends to reinforce its lineup of WAN products, to provide greater levels of automated assurance to complex networks. Financial terms of the deal were not disclosed.
The buyout will augment Juniper’s automated WAN solutions to streamline operations for service providers while ensuring better end-user experiences. The Netrounds platform can be used to test a 5G network slice, analyze the impacts of a new cloud service, or resolve performance issues on SD-WAN.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, Qualcomm was the best performer with its stock up 6%, while none of the stocks declined.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 42.2%, while AT&T was the sole decliner with its stock falling 0.9%.
Over the past six months, the Zacks Telecommunications Services industry has rallied 9.1%, while the S&P 500 has gained 32.6%.
What’s Next in the Telecom Space?
In addition to the 5G deployments and product launches, all eyes will remain glued to how the TikTok saga unfurls and whether President Trump gives a go-ahead to the transaction or seek to gain a political mileage out of it.
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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
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