Verizon’s strategy: Customers win, traders lose

Inside Verizon's device testing lab

Verizon provides brought back again the unlimited information program. That’s excellent if you’re a Verizon consumer. But it will be terrible information for its traders.

Verizon (VZ) share fell almost 1.5% in early investing Mon. It’s today down about 10% therefore significantly this calendar year, producing it the Dow’s most severe performer of 2017.

Verizon’s shift is usually a very clear indication the corporation offers to draw out all the halts to stay competing with wireless rivals AT&P (To), Short (T) and T-Mobile (TMUS).

“In latest months, both Run and T-Mobile got some achievement taking extra talk about from Verizon by virtue of their unlimited promotions, monday early morning ” wrote Morgan Stanley experts inside a record.

That may explain why gives of T-Mobile and Short, which will be managed by Western technology conglomerate SoftBank right now, this year while Verizon is down are both up. T-Mobile and Run have been perennially linked while possible combination companions also.

But the brand-new telecom cost battle isn’t the just issue for Verizon.

AT&Capital t recently obtained satellite put out service provider DirecTV, a shift that can make Ma Bell even more aggressive against Verizon in the fight to handle people’s residing areas. Verizon presents its personal FiOS broadband Television services.

Associated: Verizon brings back again unlimited information programs

And AT&Big t is furthermore producing a very much bigger wager on content material, with programs to buy CNN’s mother or father organization Period Warner (TWX). Verizon currently has AOL and will be searching to purchase the primary resources of Yahoo to strengthen its very own digital articles solutions.

But the Yahoo (YHOO) offer could drop apart in the wake of revelations of substantial information breaches at Yahoo over the recent few yrs.

Yahoo lately stated it expectations that the offer with Verizon will close up in the 2nd one fourth of this 12 months. It was supposed to end up being finalized by the first one fourth originally.

Nevertheless, in its most recent earnings discharge, Verizon basically mentioned that it “proceeds to function with Yahoo to assess the influence of information breaches” — not really that it anticipated the offer to close up anytime shortly.

Verizon provides a great deal on its plate, which could end up being making traders nervous. In add-on to the Yahoo offer, the ongoing company is also in the process of buying the fiber optic network of XO Communications. And it’s selling its data center business to Equinix (EQIX).

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

That may be more than Verizon can realistically handle right now. But nothing may be off the table for Verizon given how competitive the wireless world is these days.

Anything that could give Verizon a leg up on AT&T, T-Mobile and run might end up being possible.

Related: Charter shares popped on report of possible Verizon takeover

Still, it’s worth noting that shares of AT&T are lower this year too, down about 5%. And Verizon and A&T have something in common that Sprint and T-Mobile lack — Verizon and AT&T pay gigantic dividends.

Companies that have big dividend yields haven’t fared as well since Donald Trump was elected. Investors are betting on a sizable stimulus package from him and the Republican Congress, which may be fueled in part by debt.

That’s caused bond yields to rise — and that makes shares of big dividend payers like Verizon a lot less attractive.

The Federal Reserve is expected to raise interest rates a few times this year too. That could press bond produces higher still.

So Verizon faces many big challenges that could hurt its stock this year.

That’s why Verizon, nicknamed Big Red because of its logo’s crimson hue, may see its stock in the red for the foreseeable future.

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

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