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AT&T Offers Business Update, Qualcomm Unveils Chip & More

US telecom stocks fell steadily over the past week as rising coronavirus cases from the Omicron variant fueled fears of another lockdown across Europe. Higher infection rates across the country fueled speculation about the efficacy of the vaccines already administered and the need for booster doses. Although President Biden has refused to enforce a nationwide lockdown at this time, strict measures have been taken to contain the spread of the deadly virus. The industry witnessed a downturn due to the inherent uncertainty. In addition, mounting inflationary pressures weighed on consumer essentials and commodity costs rose, further fueling a downward trend in the sector.

Leading telecom carriers across Europe have sought help from US tech giants to bear some of the infrastructure costs needed to upgrade to a 5G and fiber network to effectively handle a large amount of data. They argued that spectrum prices are held unreasonably high by several EU governments, and to support the development of the network assets monetized by the US tech companies, a significant amount would also have to be borne by their US counterparts.

Notable company-specific news that has been in the spotlight over the past week: AT&T Inc.‘s T business update en Qualcomm IncorporatedQCOM launch of the latest 5G mobile platform. Also, Vodafone Group Public Company VOD has conducted tests with environmentally friendly mobile masts, Nokia Corporation NOK signed a five-year deal with Ooredoo and TELUS Corporation TU has unveiled its 2021 Reconciliation and Indigenous Connectivity Report.

Meanwhile, US Secretary of Commerce Gina Raimondo has urged Congress to approve $52 billion to expand domestic production of semiconductor chips. This, in turn, is likely to help the industry bridge the massive supply-demand imbalance and ramp up production of various telecommunications equipment and related products.

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Summary of the most important stories of the week

1. AT&T’s top management recently briefed investors on the current business situation, underlying growth opportunities and progress on various operational metrics. Jeff McElfresh, the company’s chief executive officer, also shed some light on ongoing business transformation initiatives to create long-term shareholder value.

McElfresh reiterated that AT&T is focusing on core wireless businesses to maintain its market leading position as the industry continues to benefit from a healthy surge in demand amid ongoing fears over the coronavirus. The company aims to profitably grow its postpaid subscriber base by leveraging its network quality and market penetration capabilities.

2. Qualcomm has unveiled its latest 5G mobile platform – Snapdragon 8 Gen 1. With advanced 5G, AI, gaming, camera and Wi-Fi and Bluetooth technologies, the Snapdragon 8 is likely to transform the next generation of flagship mobile devices .

It will be acquired by global original equipment manufacturers and brands, including Motorola, OnePlus, Oppo, Redmi and Sony. Commercial devices are expected by the end of this year. The new mobile platform brings unparalleled connectivity, photography, AI, gaming, sound and security experiences to a smartphone.

3. In a concerted effort to reduce harmful emissions and reach net-zero in the UK by 2027, Vodafone is piloting eco-friendly, self-powered mobile phone towers across the country. If the test results are favorable and economically feasible, the company will deploy the telephone towers in even the most remote locations without the need to connect them to the electricity grid.

The “Eco-Towers” run on renewable energy sources such as wind and solar for self-propelled battery operation and eliminate reliance on diesel generators for backup power. Vodafone has partnered with Crossflow Energy Company to develop these cell towers, leveraging the latter’s know-how to maximize renewable energy from a combination of wind, solar and battery storage solutions. The trials are being conducted in partnership with Cornerstone, a leading UK-based mobile infrastructure services company.

4. Nokia has been selected by Ooredoo Group to deploy multiple technologies, including 5G, radio access network, Core, Optics, IP and microwave, in the Middle East, North Africa and Southeast Asia. The five-year multi-country agreement builds on Nokia’s partnership with Ooredoo. Nokia will expand Ooredoo’s existing network and introduce 5G services. The deployment is expected to be completed in these countries by 2026.

Under the deal, Nokia will deploy equipment from its AirScale RAN portfolio to locations in North Africa and Southeast Asia. Nokia’s AirScale radio platform can deliver 5G services to customers across different spectrum bands. The deal includes digital implementation services for faster time to market and technical support.

5. TELUS recently unveiled its 2021 Reconciliation and Indigenous Connectivity Report. Canada-based telco has included its first-ever Indigenous Reconciliation Action Plan in the report.

Supported by Indigenous reconciliation frameworks, the plan focuses on addressing the essential connectivity requirements of the diverse Indigenous communities living in TELUS service areas. TELUS aims to provide local people with crucial connectivity, tools and resources, and in turn strengthen productive relationships.

Price Performance

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

Zacks Investment Research

Image Source: Zacks Investment Research

In the past five trading days, none of the stock has gained, while AT&T has fallen the most, dropping 10.1%.

Over the past six months, Arista has been the top performer, with stock up 31.2%, while bandwidth fell the most, dropping 79.4%.

Over the past six months, Zacks’ telecommunications services sector is down 16.5%, while the S&P 500 is up 9.2%.

Zacks Investment Research

Image Source: Zacks Investment Research

What’s the next step in the telecom space?

In addition to 5G deployments and product launches, all eyes remain on how the government is mitigating the risks of the Omicron variant and implementing key policy changes to protect the industry’s interests and address the bottlenecks to drive growth.

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