Telecom Stock Roundup: Qualcomm Offers Low-Cost Chips, AT&T Mulls Asset Sale & More

After an initial downtrend, the U.S. telecom stocks maintained a relatively flat trajectory for most of the past week due to challenging geopolitical situations across the globe. While the Trump administration continued its relentless pursuit to keep China-backed firms out of its telecom network in order to lend support to domestic telecommunication companies, tense international affairs triggered uncertainty within the sector. As Washington is reportedly inching closer to a decision to bar four state-backed telecommunication companies from the communist nation from operating in the United States, efforts are on to strike the right balance to maintain stability in the industry.

The U.S. Justice Department has recommended that the Pacific Light Cable Network — a high capacity undersea data cable spanning 12,800 km beneath the Pacific Ocean — should ideally bypass Hong Kong owing to political turbulence and national security concerns following China's moves to exert greater control in the territory. The low-latency fiber optic cable was originally planned to have a landing station in Hong Kong before continuing on to other parts of Asia, potentially making it vulnerable to various security threats, from data espionage and cyber hacking. Notably, the first-of-its-kind direct connection between Los Angeles and Hong Kong was expected to handle about 120 terabytes of data per second, heightening the risk factor.

Meanwhile, a new U.S. rule clarifies various restrictions pertaining to Huawei and its presence in the ‘Entity List’ by clearing concerns regarding its participation in the development of global standards. The Trump administration maintained that there will be restricted sales of U.S. goods and technology to Huawei. However, certain restrictions will be waived if Huawei contributes to the development of a global 5G standard in order to ensure there is ubiquity in 5G so that global standards are symmetrical.

Regarding company-specific news, product launch, divestment, strategic deals and acquisitions primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Qualcomm Incorporated QCOM has set a new benchmark for itself as it unveiled a game-changing 5G chipset for low-cost smartphones for the masses. The Snapdragon 690 5G chipset is the first SoC (System-on-Chip) in the 600 series to support 5G services at accessible price points. This is likely to usher in more affordable 5G Android mobile handsets, with a plethora of unique features in its category, by the second half of the year.

Built on Samsung’s 8nm fabrication process, the Snapdragon 690 is an octa-core CPU, featuring a 2+6 CPU core configuration. The two big cores are Kryo 560 cores, while the remaining six little cores are ARM Cortex-A55 cores. Compared to its predecessor, Snapdragon 675, the new chip is billed to offer up to 20% better CPU and up to 60% faster graphics performance.

2. According to industry grapevines, AT&T Inc. T is reportedly contemplating the divestment of its gaming business for as much as $4 billion to improve its liquidity position and reduce debt burden. The division, which owns some of the famous games in the market like Harry Potter: Wizards Unite, Mortal Kombat 11, Game Of Thrones Conquest as well as the Lego and Hitman franchises, is likely to lure a fair deal.

The held-for-sale business, dubbed the Warner Bros. Interactive Entertainment, has apparently evoked positive responses from potential suitors in the gaming arena. However, no official statement has yet been made by any of the firms involved in the negotiation process.

3. In order to weed out the uncertainty regarding the availability of chips for 5G equipment amid the coronavirus-induced turmoil, Nokia Corporation NOK recently strengthened its supply chain by adding Broadcom Inc. as one of its vendors. Markedly, Broadcom becomes the third 5G vendor for Nokia after Marvell Technology Group Ltd. and Intel Corporation.

Nokia had earlier decided to develop 5G equipment based on Field Programmable Gate Arrays that are easily programmable. However, high costs associated with it and a dearth of suppliers effectively forced the company to look out for cheaper alternatives. Nokia is currently aiming to develop low-cost 5G equipment with a new breed of suppliers to thwart competition from other low-cost manufacturers like Huawei.

4. Motorola Solutions, Inc. MSI has completed the acquisition of IndigoVision, which develops video security solutions, including cameras, video management software, encoders and storage devices. The move underscores the Chicago, IL-based mission-critical communication solutions provider’s investment in video security and analytics for competitive advantage.

Motorola aims to become a leader in the next-generation video security solutions market. Complementing the company’s video portfolio, which includes fixed cameras, in-car and body-worn cameras, and advanced analytics and software, IndigoVision’s products will provide greater go-to-market reach across a broader customer base.

5. Viasat, Inc. VSAT has inked an agreement with Honeywell International Inc. to provide enhanced aviation services by adding its avant-garde VR-12T shipset to Honeywell’s Maintenance Service Plan. The strategic partnership will strengthen Viasat’s in-flight connectivity (IFC) solutions and enable Ku-band Advanced customers to enjoy high-speed Internet connectivity from takeoff to touchdown.

Viasat’s Ku band solutions cover 90% of the top flight paths with seamless connectivity, thereby enabling aviation clients to reinforce their IFC investments and work with next-gen technologies for a better future. However, the financial terms of the deal were not disclosed.

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, none of the stocks increased, while AT&T has been the biggest decliner with its stock decreasing 6.2%.

Over the past six months, T-Mobile has been the best performer with its stock appreciating 24.8%, while CenturyLink was the biggest decliner with its stock falling 30.4%.

Over the past six months, the Zacks Telecommunications Services industry declined 13.2%, while the S&P 500 recorded average loss of 2.8%.

What’s Next in the Telecom Space?

In addition to product launches, deals and 5G deployments, all eyes will remain glued to how the administration attempts to devise pre-emptive steps to thwart Chinese dominance in 5G while safeguarding interests of domestic firms.

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