December 4, 2021

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AT&T Cancels Buyback Plan, Verizon Extends Reach, & More

Over the past five trading days, telecom stocks continued their steady descent in the aftermath of the coronavirus pandemic but managed to script a dramatic turnaround at the later stages as the U.S. government announced a $2-trillion economic stimulus package. The deadly virus outbreak has wreaked worldwide devastation, claiming countless lives and spooking financial markets. The industry is no exception and has been witnessing coronavirus-induced downtrend.

Although telecom firms, in general, are capable to withstand the near-term stock market bloodbath, with limited impact on credit quality owing to a recurring subscription-based business model, they remain vulnerable to the long-term recession effect. The severity and the extended duration of the virus outbreak are likely to have long-term credit implications for this capital-intensive industry. Consequently, with the availability of the government-backed stimulus package, the stocks sprang to their feet and moved northward.

The coronavirus pandemic has forced to shift almost everything in one’s life to the online domain — elementary schools, colleges, workplaces, shopping, dining, entertainment and even funeral — while users are forced to seek refuge in the safety of their homes to perform their daily chores. This, in turn, has increased the household broadband demand manifold, forcing the Federal Communications Commission (FCC) to grant additional airwaves to major wireless carriers on a temporary basis. The telecom firms have also worked in unison to handle the upsurge in broadband traffic and joined FCC’s “Keep Americans Connected Pledge”, offering a vital lifeline to countless people whose lives have been crippled by this crisis.

However, per an Analysys Mason report, the United States is lagging way behind other developed countries in the availability of licensed mid-band spectrum (3 GHz-7 GHz) for increased 5G deployment across the country. This is likely to be a critical factor in the global 5G race and a pro-active government initiative to open up new spectrum for 5G use. Adequate funding for infrastructure investments seems to be the need of the hour. This is also likely to provide further ammunition to fight the global menace, should the virus mutates in another form to threaten human existence.

Regarding company-specific news, pro-active steps to fight the virus outbreak and strategic collaboration for the 5G network primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     AT&T Inc. T recently revealed in a regulatory filing that it is withdrawing plans to repurchase $4 billion worth of stock due to the coronavirus pandemic.

AT&T was scheduled to retire $4 billion worth of stock under two accelerated share repurchase agreements. The company intended to retire about 250 million shares through April 2020. However, AT&T has now decided to cancel this stock buyback program due to the severity of the virus outbreak. The evolving nature of the contagious disease and its grave impact on the economy have forced the company to reconsider the buyback plan as it is yet to fathom the impact on its business.
2.    Verizon Communications Inc. VZ has collaborated with first responders and healthcare professionals to provide seamless network connectivity with dedicated emergency services in the United States to tackle coronavirus-related challenges.

In a concerted effort to minimize stress on public health institutions, Verizon is giving the first responders and federal agencies a priority access to their streamlined networking facilities so that they can communicate effectively not only within their departments but also with other hospitals, healthcare and public sector agencies, who are battling this crisis on the front line. Markedly, the much-acclaimed unit of Verizon — Verizon Response Team — which provides round the clock emergency services to various non-profit organizations and government agencies, continues to establish additional call centers and devise secure work-from-home strategies to prioritize network demand and ensure continuity of operations for its customers.

3.      BlackBerry Limited BB is implementing immediate steps to facilitate remote working facilities for a larger population across diverse companies in the wake of the coronavirus pandemic. In addition to ensuring the safety and wellbeing of its employees, the strategic move will enable it to fulfill corporate social responsibilities amid testing times.

BlackBerry is offering a secure and connected workplace setup through quick onboarding and enablement services that are delivered remotely. Realizing the gravity of the scenario, the company is providing secure communication services to business enterprises for free over a 60-day period. This, in turn, is likely to support the seamless continuity of businesses to enable employees to fulfill their professional obligations.

4.      CenturyLink, Inc. CTL has adopted some concrete steps to offer immediate relief and protection to its employees as the world strives hard to fight the coronavirus menace.

Realizing the gravity of the situation, CenturyLink is voluntarily providing 80 hours of emergency paid time off (PTO) to its entire U.S. workforce, in addition to all existing allotments of paid time off, sick leave and other company-provided paid and unpaid leaves. The largesse is further extended to its Canada-based employees to the extent of 75 hours of PTO.

5.       Nokia Corporation NOK has collaborated with Sprint Corporation for the deployment of a 5G network through a software upgrade on Nokia’s much-acclaimed AirScale solution. The partnership is likely to aid businesses and customers with reliable network connectivity, especially at a time when the majority of communication service providers are migrating to experience-driven and automated 5G network operations.

Touted as industry’s first-of-its-kind commercial end-to-end 5G solution, the avant-garde technology enables operators to capitalize 5G-backed opportunities on a nascent stage. The innovative solution also allows operators to boost profitability, support environment-friendly operations and maximize the value of both licensed and unlicensed spectrum with minimum future capital expenditures.

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 biggest gainer with its share price increasing 6.1%, while AT&T has been the biggest decliner with its stock down 15.7%.

Over the past six months, T-Mobile has been the best performer with its stock appreciating 2%, while CenturyLink was the biggest decliner with its stock falling 36.9%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average loss of 18.4%, while the S&P 500 declined 17.3%.

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 tackles the adversities and attempts to mitigate the virus’s overall impact on the industry.

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