Verizon has brought back unlimited data plans. If you’re a Verizon customer, that’s great. But it’s terrible news for investors.
verizon (VZ) The stock fell about 1.5% in early trading on Monday. It’s down about 10% so far this year, making it the Dow’s worst performer in 2017.
Verizon’s move underlines that the company must do whatever it takes to stay competitive with its wireless rivals AT&T (T.), sprint (S.) When T-mobile (TMUS).
“In recent months, both T-Mobile and Sprint have had some success capturing additional share from Verizon thanks to their unlimited service,” Morgan Stanley analysts reported Monday morning. I am writing in
This may explain why T-Mobile and Sprint stocks have risen this year, while Verizon has fallen. T-Mobile and Sprint have also long been linked as potential merger partners.
But new telecom price wars aren’t the only problem for Verizon.
AT&T recently acquired satellite provider DirecTV. This will allow Ma Bell to better compete with Verizon in the battle for control of people’s living rooms. Verizon has its own FiOS broadband TV service.
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AT&T is also betting big on content with plans to acquire CNN’s parent company. time warner (TWX)Verizon already owns AOL and is looking to acquire Yahoo’s core assets to bolster its digital content offerings.
However Yahoo (YHOO) The deal could fall apart following the revelations of a massive data breach at Yahoo over the past few years.
Yahoo recently said it hopes the deal with Verizon will be completed in the second quarter of this year. It was originally scheduled to be completed by the first quarter.
However, in its latest earnings call, Verizon only said it was “continuing to work with Yahoo to assess the impact of the data breach,” and did not expect the deal to close anytime soon.
Verizon has a lot of challenges that may be making investors uneasy. In addition to the Yahoo deal, the company is also in the process of acquiring his XO Communications fiber optic network.data center business Equinix (EQIX).
There have also been rumors in recent weeks that Verizon is considering buying the cable provider. charter communication (CHTRMore).
This is likely more than Verizon can realistically handle right now. But given how competitive the wireless world is these days, Verizon may have nothing to consider.
Anything Verizon can do in favor of AT&T, Sprint, and T-Mobile.
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Still, it’s worth noting that AT&T’s stock has remained low this year, down about 5%. Verizon and A&T have something in common that Sprint and T-Mobile do not. Verizon and AT&T pay huge dividends.
Companies with high dividend yields have not performed well since Donald Trump was elected. Investors are betting on substantial stimulus from him and the Republican Congress, some of which may be backed by debt.
That has pushed bond yields higher, making the stocks of companies like Verizon that pay big dividends much less attractive.
The Federal Reserve is expected to raise interest rates several times this year as well. This could push bond yields even higher.
As such, Verizon faces a number of major challenges this year that could affect its stock price.
So Verizon, nicknamed Big Red because of the crimson color of its logo, could be in the red in the near future.
CNNMoney (New York) First published February 13, 2017: 11:27 AM ET
