After a relatively flat trajectory for most of the past week, the U.S. telecom stocks witnessed a sharp downtrend toward the later phase of the 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 aims to strike the right balance to maintain stability in the industry and gain 5G dominance, reports of potential enforcement of new tariffs with several EU countries fueled insecurity and hastened the slide.
After the prod from the U.S. Justice Department, the Team Telecom — the committee formed by the Trump administration to review foreign participation in the telecom service sector – has now 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 due 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 to 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, the U.S. government is reportedly considering a plan to impose $3.1 billion in tariffs on goods from the United Kingdom, France, Germany and Spain. The purported move is part of the long-standing dispute with the European Union over subsidies to some large civil aircraft manufacturers. This has likely created a sense of uncertainty within the industry as it could potentially lead to an escalation of trade spat and initiate a tit-for-tat battle.
Regarding company-specific news, product launches, strategic deals and trials primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. In a concerted effort to enhance network virtualization capabilities, Verizon Communications Inc. VZ has expanded its Virtual Network Services (“VNS”) portfolio with the addition of a new hybrid platform from Cisco Systems, Inc. The purpose-built 5000 Series Enterprise Network Compute System (“ENCS”) from Cisco is likely to redefine the networking ecosystem for enterprise customers and strengthen Verizon’s position in this niche market.
With the introduction of Cisco’s ENCS platform, Verizon has further enriched its VNS portfolio, offering enterprise customers a more responsive, scalable and flexible network. Combining the best attributes of a traditional router and server with a smaller infrastructure footprint, it offers low cost of ownership with software-defined flexibility and performance.
2. In a concerted effort to enhance the service capabilities of customers in Singapore, CenturyLink, Inc. CTL has extended its global alliance with SAP SE to better serve businesses in the region. The strategic initiative will enable business enterprises to have seamless access to SAP business management solutions along with managed end-to-end applications, hybrid cloud and edge capabilities of CenturyLink's secure, global network.
Per the global alliance, CenturyLink is equipped to offer support for SAP solutions and services deployed on public and private clouds, including SAP S/4HANA implementations. These, in turn, enable various firms to complement and expand the IT resources and expertise across hybrid IT environments to drive efficiencies, enhance security and improve business insight.
3. Speaking at the Credit Suisse Communications Conference, AT&T Inc.’s T senior executive vice president and chief financial officer, John Stephens, provided an update to shareholders. The Dallas, TX-based telecommunications company’s 5G network currently covers more than 160 million people in 327 markets.
AT&T is offering access to 5G on its unlimited wireless plans for consumers and businesses. The company continues to invest in its wireless and wireline networks to expand coverage and improve connectivity. Consumers in Atlanta, Baton Rouge, Nashville and Tallahassee, among others, now have access to the AT&T 5G network. Also, the company offers access to its 5G+ network, enabling super-fast speeds and responsive connections in parts of 35 cities.
4. In a move to revamp connectivity services in Russia, Ciena Corporation CIEN teamed up with GlobalNet, a leading telecommunications company. GlobalNet deployed Ciena’s coherent optical technology — WaveLogic 5 Extreme (WL5e) — to deliver high-quality bandwidth and interconnect services across various data centers for a streamlined network infrastructure. Supported by a global scale of operations, diversification and technology leadership, the latest collaboration will enable Ciena to benefit from market share gains and enhance network automation capabilities.
Per the deal, GlobalNet used Ciena’s WaveLogic 5 Extreme network to deliver cost-effective and seamless connectivity solutions across Russia. The WL5e technology is the fifth generation of coherent optical solutions that enable deployment of optical networking with an unparalleled single wavelength capacity of 800G. As a result, the telco achieved an impressive network capacity of 800 Gbps across data centers in Saint Petersburg and 600 Gbps between Moscow and Saint Petersburg.
5. Accelerating its pace to offer the best mix of 5G network capacity and coverage to subscribers across the United States, Nokia Corporation NOK recently announced that it has achieved impressive gigabit speeds in a trial of advanced 5G technology on a C-Band spectrum. Notably, the trial leveraged Nokia’s AirScale 5G base station equipment to deliver end-to-end 5G solution with industry-leading latency and connectivity.
Touted as the first company to showcase live C-Band network in the United States, the latest achievement is expected to help businesses and customers with superior network capacity, especially at a time when communication service providers are shifting toward automated network operations for seamless connectivity.
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 Arista Networks has been the biggest decliner with its stock decreasing 8.3%.
Over the past six months, T-Mobile has been the best performer with its stock appreciating 28.6%, while CenturyLink was the biggest decliner with its stock falling 34.6%.
Over the past six months, the Zacks Telecommunications Services industry declined 15.9%, while the S&P 500 recorded average loss of 5.7%.
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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