Telecom Stock Roundup: Verizon-Deloitte Ink Deal, Viasat to Acquire RigNet & More

The U.S. telecom stocks witnessed a steady downtrend over the past week as President Trump rejected a bipartisan aid package worth $2.3 trillion. This included funds for federal government agencies and $892 billion for responding to the coronavirus crisis. Due to the lack of immediate financial aid, the industry, which was already reeling under the recent government directive to ‘rip and replace’ all telecommunications equipment produced by China-based Huawei, was plagued by uncertainty. To add to the woes, the emergence of a new COVID-19 virus strain in the United Kingdom has led to a surge in infections, forcing a series of fresh lockdown restrictions in various parts of Europe, thereby hindering the industry’s growth prospects.

In an act of political brinkmanship, Trump has refused to sign the coronavirus relief bill citing it as a ‘disgrace’ and ‘full of wasteful items’. He has reportedly sought to increase the proposed $600 payment in the bill as a COVID-19 relief measure to each Americans to $2,000, while eliminating several ‘unnecessary’ items within the draft bill. The political deadlock is likely to stall all government functions and the country might be staring at a potential shutdown, leading to furlough of millions of federal workers. The bill also included a provision for $1.9 billion funding to remove telecommunications equipment from firms that allegedly pose national security risks. The double blow created an element of insecurity within the industry, triggering a downtrend.

Meanwhile, the C-Band auction, which is offering 280 megahertz of spectrum in the 3.7-3.98 GHz band for potential 5G deployments in the next few years, generated more than $69 billion in bids from 57 qualified bidders after about 45 rounds. The C-Band offers significant bandwidth with better propagation characteristics compared with mmWave, which has a short range and requires a high density of sites to achieve coverage. Consequently, it is deemed to be a prized asset for carriers that lack considerable mid-band spectrum holdings, thereby justifying the record bidding amount.    

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

Recap of the Week’s Most Important Stories

1.     Verizon Communications Inc. VZ has joined forces with Deloitte to expand 5G and mobile edge computing (MEC) solutions that are believed to disrupt almost every sector, particularly manufacturing and retail. The telecom giant is focused on aligning with enterprises, universities and government to explore how next-generation technologies can transform the way in which organizations operate.

This solution will utilize sensor-based detection alongside MEC, Software Defined-Wide Area Network and VNS Application Edge capabilities to identify and predict quality defects on the assembly line. It will automatically alert plant engineering and management in near real-time.
 
2.     Viasat, Inc. VSAT has inked a deal to acquire RigNet, Inc. in an all-stock transaction valued at $222 million. Headquartered in Houston, TX, RigNet is a leading provider of networking solutions and specialized applications. It delivers advanced software and communications infrastructure that allows business customers to realize the benefits of digital transformation.

The acquisition creates a vertically integrated communications company. It will serve customers in industries like airlines, residential and energy by providing leading-edge connectivity from the satellite to the end customer.  The combined firm will boost RigNet’s industry-leading AI-backed machine learning business, Intelie.

3.     BlackBerry Limited BB reported solid third-quarter fiscal 2021 results (ended Nov 30, 2020), with the bottom line beating the Zacks Consensus Estimate. QNX design wins and notable cybersecurity partnerships bode well. The company is also witnessing significant traction in the Spark business.

Non-GAAP earnings came in at $11 million or 2 cents per share compared with $17 million or 3 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents. Non-GAAP revenues for the quarter were $224 million, which matched the consensus estimate.

4.    Arista Networks, Inc. ANET has introduced an advanced security service, the Attack Surface Assessment (ASA). In October, the company completed the acquisition of Awake Security, a Network Detection and Response platform provider that combines AI with human expertise to respond to threats. The latest offering identifies cybersecurity risks from devices, users and third-party systems, especially those that go unmonitored.

The ASA combines human expertise in digital forensics and incident response from Arista’s Awake Labs team with its industry-leading network detection and response technology. The threat assessment focuses on identifying technical risks within the environment; internal and external risk factors that increase the likelihood of a breach; early warning of a potential threat and gaps in incident remediation practices.  

5.      Juniper Networks, Inc. JNPR has announced that JoongAng Group, South Korea’s leading media company, has chosen its solutions to transform the network system of the latter. The Sunnyvale, CA-based computer network equipment maker continues to see encouraging trends across various areas of its business, including solid momentum in Mist Systems.

To that end, JoongAng Group has decided to have an infrastructure that is based on the smart office concept. This would provide the company with a secure wireless network that would bridge the two physically separated buildings. If the two buildings’ networks were not integrated properly, employees would have to go through complicated processes.

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, T-Mobile has been the sole performer with its stock gaining 1.8%, while AT&T was the biggest decliner with its stock falling 5.4%.

Over the past six months, Qualcomm has been the best performer with its stock appreciating 39.5%, while AT&T was the biggest decliner with its stock falling 3.4%.

Over the past six months, the Zacks Telecommunications Services industry has rallied 6.7% on average and the S&P 500 has gained 20.7%.

What’s Next in the Telecom Space?

In addition to the 5G deployments and product launches, all eyes will remain glued to how the administration continues to safeguard the interests of domestic telecom firms from perceived Chinese threats.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
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