Verizon’s new plan: Consumers win, investors lose

Inside Verizon's Device Test Lab

Verizon has brought back its unlimited data plan. That’s great if you’re a Verizon customer. But it was terrible news for its investors.

Verizon (VZ) shares fell nearly 1.5% in early trading on Monday. It is now down about 10% so far this year, making it the Dow’s worst performing index of 2017.

Verizon’s move is a clear sign that the company must pull all the stops to stay competitive with its wireless rivals. AT&T (BILLION), acceleration (S) and T Mobile (TMUS).

“In recent months, both T-Mobile and Sprint have successfully acquired additional shares from Verizon thanks to their unlimited services,” Morgan Stanley analysts wrote in a Monday morning report. .

That might explain why shares of T-Mobile and Sprint, now controlled by Japanese tech giant SoftBank, have both risen this year while Verizon fell. T-Mobile and Sprint have also long been linked as possible merger partners.

But the new telecom price war isn’t unique to Verizon.

AT&T recently acquired satellite broadcaster DirecTV, a move that helps Ma Bell compete more with Verizon in the battle for control of people’s living rooms. Verizon offers its own FiOS broadband TV service.

Related: Verizon Brings Back Unlimited Data Plans

And AT&T is also betting much bigger on content, with plans to buy CNN’s parent company Time Warner (TWX). Verizon already owns AOL and is looking to buy Yahoo’s core assets to enhance its own digital content offerings.

But Yahoo! (YHOO) The deal could fall apart after the disclosure of a major data breach at Yahoo over the past few years.

Yahoo recently said it expects that deal with Verizon to close in the second quarter of this year. It was originally supposed to be completed in the first quarter.

However, in its latest earnings announcement, Verizon only said that it “continues to work with Yahoo to assess the impact of data breaches” – not that it expects the deal to close anytime soon. end.

Verizon has a lot going for it, which can make investors nervous. In addition to the deal with Yahoo, the company is also in the process of acquiring XO Communications’ fiber optic network. And they are selling their data center business to Equinix (EQIX).

There have also been rumors in the past few weeks that Verizon might even consider acquiring the cable provider Communications Charter (CHAPTER).

That’s probably more than what Verizon can realistically handle right now. But it probably doesn’t matter to Verizon given how competitive the wireless world is today.

Anything that can help Verizon get ahead of AT&T, Sprint, and T-Mobile is possible.

Related: Charter shares appear in report of possible Verizon takeover

It’s worth noting, however, that AT&T stock is also lower this year, down about 5%. And Verizon and A&T have something in common that Sprint and T-Mobile lack – Verizon and AT&T pay huge dividends.

Companies with large dividend yields have also not skyrocketed since Donald Trump was elected. Investors are betting on a sizable stimulus package from him and the Republican Congress, possibly fueled in part by debt.

That drives bond yields up — and that makes stocks of big dividend payers like Verizon a lot less attractive.

The Federal Reserve is also expected to raise interest rates a few times this year. That could push bond yields even higher.

So Verizon faces a number of major challenges that could weigh on its stock this year.

That’s why Verizon, nicknamed Big Red because of the crimson color of its logo, could see its stock in red in the near future.

CNNMoney (New York) Originally published February 13, 2017: 11:27 AM ET Verizon’s new plan: Consumers win, investors lose

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