HomeFinanceVerizon's new plan: Consumers win, investors lose

Verizon’s new plan: Consumers win, investors lose

Inside Verizon's device testing lab

Verizon has introduced again its limitless knowledge plan. That’s nice should you’re a Verizon buyer. But it’s horrible information for its investors.

Verizon (VZ) inventory fell almost 1.5% in early buying and selling Monday. It’s now down about 10% thus far this 12 months, making it the Dow’s worst performer of 2017.

Verizon’s transfer is a transparent signal the corporate has to drag out all of the stops to stay aggressive with wi-fi rivals AT&T (T), Sprint (S) and T-Mobile (TMUS).

“In recent months, both T-Mobile and Sprint had some success taking additional share from Verizon by virtue of their unlimited offerings,” wrote Morgan Stanley analysts in a report Monday morning.

That might clarify why shares of T-Mobile and Sprint, which is now managed by Japanese tech conglomerate SoftBank, are each up this 12 months whereas Verizon is down. T-Mobile and Sprint have additionally been perennially linked as doable merger companions.

But the new telecom value warfare is not the one downside for Verizon.

AT&T not too long ago acquired satellite tv for pc broadcast supplier DirecTV, a transfer that makes Ma Bell extra aggressive towards Verizon within the battle to manage folks’s dwelling rooms. Verizon gives its personal FiOS broadband TV service.

Related: Verizon brings again limitless knowledge plans

And AT&T can be making a a lot greater guess on content material, with plans to buy CNN’s mother or father firm Time Warner (TWX). Verizon already owns AOL and is trying to purchase the core property of Yahoo to bolster its personal digital content material choices.

But the Yahoo (YHOO) deal may collapse within the wake of revelations of large knowledge breaches at Yahoo over the previous few years.

Yahoo not too long ago mentioned it hopes that the take care of Verizon will shut within the second quarter of this 12 months. It was initially alleged to be finalized by the primary quarter.

However, in its newest earnings launch, Verizon merely mentioned that it “continues to work with Yahoo to assess the impact of data breaches” — not that it anticipated the deal to shut anytime quickly.

Verizon has rather a lot on its plate, which could possibly be making investors nervous. In addition to the Yahoo deal, the corporate can be within the course of of shopping for the fiber optic community of XO Communications. And it is promoting its knowledge middle enterprise to Equinix (EQIX).

There even have been rumors prior to now few weeks that Verizon would possibly even think about shopping for cable supplier Charter Communications (CHTR).

That could also be greater than Verizon can realistically deal with proper now. But nothing could also be off the desk for Verizon given how aggressive the wi-fi world is lately.

Anything that might give Verizon a leg up on AT&T, Sprint and T-Mobile could be doable.

Related: Charter shares popped on report of doable Verizon takeover

Still, it is value noting that shares of AT&T are decrease this 12 months too, down about 5%. And Verizon and A&T have one thing in widespread that Sprint and T-Mobile lack — Verizon and AT&T pay gigantic dividends.

Companies which have huge dividend yields have not fared as properly since Donald Trump was elected. Investors are betting on a large stimulus package deal from him and the Republican Congress, which can be fueled partly by debt.

That’s induced bond yields to rise — and that makes shares of massive dividend payers like Verizon rather a lot much less enticing.

The Federal Reserve is predicted to boost rates of interest a couple of instances this 12 months too. That may push bond yields even greater.

So Verizon faces many huge challenges that might damage its inventory this 12 months.

That’s why Verizon, nicknamed Big Red due to its emblem’s crimson hue, may even see its inventory within the crimson for the foreseeable future.

CNNMoney (New York) First printed February 13, 2017: 11:27 AM ET



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