The U.S. week ahead: As Huawei and trade tensions rattle nerves

Uncertainties over Chinese telecoms equipment maker Huawei seem to have cast a shadow over U.S. telecom operators, which have generally been ramping up their efforts to achieve an edge in rolling out nationwide 5G (next generation) technology.

The eagerly awaited 5G connectivity is widely expected to open-up a vast array of services, including for broadband, mobile and The Internet of Things (IoT), as well as the necessary bandwidth and low latency for 3D and virtual reality (VR) applications.

It appears conducting business in China has become more sensitive for many of the largest U.S. telecom-media-technology (TMT) companies, given the recent, harsh spotlight thrown onto Huawei.

Firms such as Apple (NASDAQ: AAPL) and Alphabet’s Google (NASDAQ: GOOGL), among others for example, are likely to face diminished growth prospects, amid what may be a protracted period of confrontation and volatility in the region.

In fact, it seems the global supply chain will likely be disrupted by the Huawei-ban.

UK-based telcom research firm CCS Insight highlighted that the “big uncertainty facing 5G technology is the extent to which operators in major markets, especially in Europe, will be permitted to use Huawei’s 5G equipment. Large European operators such as Vodafone and BT have warned that without the Chinese manufacturer’s equipment, 5G in Europe could be delayed by more than a year.”

Moreover, some analysts think the U.S.’s major carriers, such as AT&T (NYSE: T) and Verizon (NYSE: VZ), may fall short of China’s likely dominance in the 5G arena.

CCS Insight noted that “China will propel growth and is expected to be the largest 5G market by the end of 2020. In 2025, with over 1 billion 5G connections, it will be the home of 37% of global 5G connections.” They added that many new 5G networks will arrive in the second half of 2019, and especially in 2020, when operators “will wish to move to 5G to take advantage of capacity gains and lower costs for serving smartphone users, whose appetite for mobile data is quickly growing.”

AT&T and Verizon, as well as South Korea’s KT Telecom and Swisscom in Switzerland, among others, have all taken their first steps in the commercial deployment of 5G.

Call to Conference

Against this backdrop, many investors will likely be paying attention to New York-headquartered investment advisor Cowen Technology’s 47^th Annual Technology, Media and Telecom Conference.

Wednesday, May 29, and

Thursday, May 30

• Location: Lotte, New York Palace, New York City

Among the attendees, AT&T is slated to webcast a presentation by Scott Mair, its president of operations, at Cowen’s TMT conference on Thursday, May 30 at 8:30 a.m. ET.

AT&T has had its foot firmly planted in integrating telecom, media and technology in the fierce competition among U.S. telecoms for market share and growth. The company has underscored this battle in its mammoth acquisition of Time Warner, which had been granted federal court approval last June.

To exploit the general fascination with 5G, AT&T said earlier in May that it plans to establish the next-gen wireless network as a long-term fixture at its Warner Bros. (WB) division in the coming year.

The giant telco noted that it intends to install 5G at AT&T SHAPE – an event it will host in Los Angeles in late June – with an aim to cover the entire WB studio facility for the long-haul. At SHAPE, AT&T said it will present 5G-fueled interactive experiences, such as IoT-enabled travel, gaming, volumetric video capture, as well as virtual reality content.

The telco’s eye on innovation may help buoy its growth, despite the ongoing trade frictions, amid increased sales in WarnerMedia in the first quarter of 2019.

Dave Novosel, a senior analyst at corporate bond research service firm Gimme Credit, noted that WarnerMedia revenue grew 3.3% on a pro forma basis, “reflecting strong growth” at WB for both theatrical and television production sales.

AT&T posted a total of US$44.8bn in consolidated revenues for the first quarter of 2019, up 17.8% from the same year-ago quarter, primarily due to its purchase of Time Warner.

The telco said declines in certain operations, including its legacy wireline services, wireless equipment and domestic video were more than offset by the addition of WarnerMedia, its domestic wireless services, as well as its ad unit Xandr.

Shares of AT&T were last up around 0.5% to US$32.30 intraday Friday, a rise of more than 18% from their 52-week low set in December 2018, according to the IBKR Trader Workstation (TWS).

Meanwhile, investors looking at the week ahead will also find:

Wednesday, May 29

• Bristol-Myers Squibb Annual Shareholder Meeting

Thursday, May 30

• Facebook Annual Shareholder Meeting
• Sanford C. Bernstein Strategic Decisions Conference
• Waste Management Investor Day

• Visit Interactive Brokers website

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