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Telecom Stock Roundup: Nokia Faces EU Probe, BlackBerry's Q4 Earnings & More

Supriyo Bose

In the past five trading days, telecom stocks witnessed an overall downtrend as uncertainty regarding U.S.-China trade negotiations persisted. An apparently sluggish pace of discussions and the resultant listless pace of reforms in China are seemingly eroding the patience of the U.S. firms as they gear up for 5G transformation across the country. As the industry awaits an early resolution to the prolonged bilateral talks to better focus on the impending 5G boom, efforts are on to give a final push to a mutually acceptable trade deal that is easily enforceable.

Both the United States and China seem eager to walk the extra mile to reach a consensus decision that honors domestic obligations and international commitments. The U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer have resumed discussions with a Chinese delegation led by Vice Premier Liu He in Washington this week. Although the White House has qualified the talks as encouraging and ‘making good headway’ for a probable settlement within this month, the enforceability of the purported deal remains the latest stumbling block. China has reportedly agreed to periodic meetings at the levels of office director, vice minister and minister to keep a tab on its deal commitments. However, the Communist nation is resisting univocal U.S. powers to re-impose tariffs unilaterally if it revokes the trade agreement and Beijing’s inability to retaliate on such occasions with its own punitive measures.

Per the latest report by the Cellular Telecommunications Industry Association, which represents the U.S. wireless communications industry, both the United States and China are currently on equal footing for 5G readiness. This represents a marked improvement from the last year when the United States was trailing way behind China and South Korea. This was made possible through continued investments from the industry and a prod from the top policymakers to update networks faster. With a holistic top-down approach, the United States was able to expedite the process to set up the required infrastructure and back it up with testing and launching of early networks in key locations. As the battle for 5G supremacy intensifies, it remains imperative for the United States to clinch a favorable deal that would help it achieve the coveted technological dominance.

Regarding company-specific news, antitrust regulatory cases, earnings, strategic restructuring and collaborations primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    As Nokia Corporation NOK gears up for the upcoming technology cycle with an end-to-end portfolio, it is facing certain roadblocks from some unlikely corners. The latest impediment appears to come from German automobile manufacturer Daimler AG, which registered a complaint with EU antitrust regulators to initiate a probe against Nokia’s patents.

The bone of contention is Nokia’s patents relating to the automotive industry, which Daimler alleges are essential for the development of new products and services for connected driving. (Read more: Nokia Might Face Patent Probe From EU Antitrust Regulators)

2.    BlackBerry Limited BB reported solid fourth-quarter fiscal 2019 (ended Feb 28, 2019) financial results, primarily driven by growth in software and services business, and lower overall operating expenses.

Quarterly non-GAAP net income came in at $60 million or 11 cents per share, beating the Zacks Consensus Estimate by 7 cents. Quarterly non-GAAP revenues were $257 million compared with $239 million in the year-earlier quarter. The top line surpassed the consensus estimate of $227 million. (Read more: BlackBerry Q4 Earnings Top Estimates on Higher Revenues)

3.    In a concerted effort to remain abreast of latest technological updates, BCE Inc. BCE has decided to close down its legacy CDMA wireless network by Apr 30, 2019. The strategic move follows the transition of 99% its users to 4G LTE network as the company aims to have a uniform coverage across Canada.

Bell, BCE’s wholly owned subsidiary, initiated the process to wind down its CDMA network in 2017, and has almost completed it barring a few areas in Manitoba, Ontario, Québec and the Atlantic provinces. The company has notified users in these areas about the final phase of the transition by the end of this month. (Read more: BCE Unit to Wind Down CDMA Network for 4G LTE in Canada)

4.    Arista Networks, Inc. ANET recently announced that its cutting-edge switching infrastructure has been chosen by CBC/Radio-Canada — Canada’s national public broadcaster — for the latter’s new “Maison de Radio-Canada” (MRC) in Montreal.

With this strategic move, the cloud networking company intends to provide CBC with high-performance IP Switching platforms, Arista EOS (Extensible Operating System) software, and services that will likely make MRC one of the most advanced IP broadcast facilities in the world. (Read more: Arista Chosen by CBC for IP Broadcast Facility in Montreal)

5.    Juniper Networks, Inc. JNPR has announced that LINE Corporation — a leading instant messaging application operator — has selected it to assist the latter’s exponential growth in traffic demands, on account of a burgeoning user base of more than 164 million customers per month across four countries.

In addition, Tokyo-based LINE has gone bigger as it has expanded beyond instant messaging into a full-fledged IT services platform. Markedly, with a solid growth momentum since its launch in 2011, particularly in its major metropolitan markets of Japan, Taiwan, Thailand and Indonesia, LINE has witnessed a striking 30-fold Internet traffic growth in the past six years. (Read more: Juniper Networking Solutions to Boost LINE's Services Growth)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.

In the past five trading days, Juniper was the biggest gainer with its share price increasing 4.8% while Sprint was the largest decliner with its stock down 7.9%.

Over the past six months, SBA Communications has been the best performer with its stock appreciating 23.6% while Qualcomm declined the most with its shares falling 23.5%.

Over the past six months, the Zacks Telecommunications Services industry has declined 2% compared with the S&P 500’s fall of 0.2%.

What’s Next in the Telecom Space?

In addition to product launches and deployment of 5G technologies, all eyes will remain glued to how the United States and China continue their negotiations for a long-term solution to the trade war.

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