Verizon’s new plan: Consumers win, investors lose

Inside Verizon's device testing lab

Verizon has introduced again its limitless knowledge plan. That is nice in the event you’re a Verizon buyer. However it’s horrible information for its traders.

Verizon (VZ) inventory fell practically 1.5% in early buying and selling Monday. It is now down about 10% up to now this yr, 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), Dash (S) and T-Cellular (TMUS).

“In latest months, each T-Cellular and Dash had some success taking extra share from Verizon by advantage of their limitless choices,” wrote Morgan Stanley analysts in a report Monday morning.

Which will clarify why shares of T-Cellular and Dash, which is now managed by Japanese tech conglomerate SoftBank, are each up this yr whereas Verizon is down. T-Cellular and Dash have additionally been perennially linked as potential merger companions.

However the brand new telecom worth conflict is not the one downside for Verizon.

AT&T lately acquired satellite tv for pc broadcast supplier DirecTV, a transfer that makes Ma Bell extra aggressive in opposition to Verizon within the battle to manage individuals’s residing rooms. Verizon provides its personal FiOS broadband TV service.

Related: Verizon brings back unlimited data plans

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

However the Yahoo (YHOO) deal might crumble within the wake of revelations of large knowledge breaches at Yahoo over the previous few years.

Yahoo lately mentioned it hopes that the take care of Verizon will shut within the second quarter of this yr. It was initially alleged to be finalized by the primary quarter.

Nonetheless, in its newest earnings launch, Verizon merely mentioned that it “continues to work with Yahoo to evaluate the influence of information breaches” — not that it anticipated the deal to shut anytime quickly.

Verizon has lots on its plate, which could possibly be making traders nervous. Along with 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 contemplate shopping for cable supplier Constitution Communications (CHTR).

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

Something that would give Verizon a leg up on AT&T, Dash and T-Cellular is perhaps potential.

Related: Charter shares popped on report of possible Verizon takeover

Nonetheless, it is value noting that shares of AT&T are decrease this yr too, down about 5%. And Verizon and A&T have one thing in widespread that Dash and T-Cellular lack — Verizon and AT&T pay gigantic dividends.

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

That is precipitated bond yields to rise — and that makes shares of huge dividend payers like Verizon lots much less enticing.

The Federal Reserve is anticipated to lift rates of interest a couple of occasions this yr too. That might push bond yields even greater.

So Verizon faces many huge challenges that would harm its inventory this yr.

That is why Verizon, nicknamed Massive Pink due to its emblem’s crimson hue, might even see its inventory within the purple for the foreseeable future.

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

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