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Verizon’s new plan: Consumers win, investors lose


Verizon has introduced back its endless knowledge system. Which is great if you happen to be a Verizon client. But it is terrible information for its investors.

Verizon (VZ) stock fell almost 1.5% in early investing Monday. It’s now down about 10% so much this yr, making it the Dow’s worst performer of 2017.

Verizon’s shift is a distinct indicator the business has to pull out all the stops to continue to be aggressive with wireless rivals AT&T (T), Dash (S) and T-Cellular (TMUS).

“In recent months, both of those T-Mobile and Sprint had some accomplishment getting additional share from Verizon by advantage of their unrestricted offerings,” wrote Morgan Stanley analysts in a report Monday morning.

That may well explain why shares of T-Cell and Dash, which is now managed by Japanese tech conglomerate SoftBank, are both of those up this year whilst Verizon is down. T-Mobile and Dash have also been perennially linked as possible merger partners.

But the new telecom cost war is not the only issue for Verizon.

AT&T just lately acquired satellite broadcast company DirecTV, a transfer that helps make Ma Bell additional aggressive in opposition to Verizon in the fight to regulate people’s living rooms. Verizon provides its individual FiOS broadband Television set provider.

Related: Verizon brings back limitless facts strategies

And AT&T is also generating a significantly larger bet on articles, with programs to order CNN’s dad or mum enterprise Time Warner (TWX). Verizon by now owns AOL and is searching to buy the main assets of Yahoo to bolster its have electronic content offerings.

But the Yahoo (YHOO) deal could fall apart in the wake of revelations of enormous information breaches at Yahoo in excess of the previous few many years.

Yahoo a short while ago said it hopes that the deal with Verizon will close in the second quarter of this calendar year. It was originally supposed to be finalized by the 1st quarter.

Nevertheless, in its hottest earnings release, Verizon simply just mentioned that it “continues to function with Yahoo to evaluate the influence of knowledge breaches” — not that it envisioned the offer to shut anytime quickly.

Verizon has a ton on its plate, which could be creating traders nervous. In addition to the Yahoo offer, the enterprise is also in the method of acquiring the fiber optic network of XO Communications. And it is really providing its info center organization to Equinix (EQIX).

There also have been rumors in the past handful of months that Verizon might even think about getting cable provider Charter Communications (CHTR).

That may possibly be extra than Verizon can realistically cope with right now. But nothing at all might be off the desk for Verizon provided how competitive the wireless globe is these days.

Something that could give Verizon a leg up on AT&T, Dash and T-Cell may be feasible.

Similar: Charter shares popped on report of achievable Verizon takeover

Continue to, it can be value noting that shares of AT&T are reduced this yr as well, down about 5%. And Verizon and A&T have a little something in prevalent that Sprint and T-Cell deficiency — Verizon and AT&T pay back gigantic dividends.

Businesses that have big dividend yields haven’t fared as properly considering the fact that Donald Trump was elected. Traders are betting on a sizable stimulus package deal from him and the Republican Congress, which may well be fueled in element by credit card debt.

That’s brought on bond yields to rise — and that makes shares of large dividend payers like Verizon a lot much less desirable.

The Federal Reserve is anticipated to increase interest charges a handful of periods this 12 months far too. That could press bond yields even increased.

So Verizon faces a lot of massive issues that could hurt its stock this year.

That’s why Verizon, nicknamed Large Pink for the reason that of its logo’s crimson hue, may perhaps see its inventory in the red for the foreseeable foreseeable future.

CNNMoney (New York) Initial posted February 13, 2017: 11:27 AM ET



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IOANNIS DIVRAMIS

I am John Divramis. l had studied marketing and l have an MBA degree from Bucks University in London. I am a professional SEO specialist and since 2000 l work full time on SEO.

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