Verizon has brought back its unlimited data plan. This is great if you are a Verizon customer. But this is terrible news for its investors.
Verizon (VZ) the stock fell nearly 1.5% at the start of trading on Monday. It is now down around 10% so far this year, making it the worst Dow Jones result of 2017.
Verizon’s move is a clear sign that the company must do everything it can to remain competitive against its wireless competitors AT&T (T), Sprint (S) and T Mobile (TMUS).
“In recent months, T-Mobile and Sprint have managed to take additional shares of Verizon due to their unlimited offers,” Morgan Stanley analysts wrote in a report Monday morning.
This may explain why shares of T-Mobile and Sprint, which are now controlled by Japanese tech conglomerate SoftBank, are both up this year while Verizon is down. T-Mobile and Sprint have also been permanently linked as possible merger partners.
But the new telecommunications price war isn’t the only problem for Verizon.
AT&T recently acquired satellite broadcast provider DirecTV, a move that makes Ma Bell more competitive against Verizon in the battle to control people’s lounges. Verizon offers its own FiOS broadband TV service.
Related: Verizon Brings Back Unlimited Data Plans
And AT&T is also making a much bigger bet on content, with plans to buy CNN’s parent company. Time warner (TWX). Verizon already owns AOL and is looking to buy major assets from Yahoo to bolster its own digital content offerings.
But the Yahoo (YHOO) The deal could collapse following revelations of massive data breaches at Yahoo in recent years.
Yahoo recently said it expects the deal with Verizon to be reached in the second quarter of this year. It was initially due to be finalized in the first quarter.
However, in its latest earnings release, Verizon simply said it “continues to work with Yahoo to assess the impact of data breaches” – not that it expects the deal to go through. so early.
Verizon has a long way to go, which could make investors nervous. In addition to the deal with Yahoo, the company is also in the process of purchasing the fiber optic network from XO Communications. And he sells his data center business to Equinix (EQIX).
There have also been rumors in recent weeks that Verizon may even consider buying a cable provider. Communication of the Charter (CHTR).
This may be more than Verizon can realistically handle at the moment. But nothing is impossible for Verizon given how competitive the wireless world is these days.
Anything that could give Verizon a head start over AT&T, Sprint, and T-Mobile might be possible.
Related: Charter Shares Erupted Following Announcement Of Possible Verizon Takeover
Still, it’s worth noting that AT&T shares are also down this year, down around 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 have not done as well since Donald Trump was elected. Investors are betting on a significant stimulus package from him and the Republican Congress, which could be fueled in part by debt.
This has driven bond yields up – and it makes stocks of big dividend payers like Verizon much less attractive.
The Federal Reserve is also expected to raise interest rates a few times this year. This could push bond yields even higher.
Verizon therefore faces many significant challenges that could hinder its action this year.
That’s why Verizon, dubbed Big Red because of the crimson tint of its logo, may see its stock in the red for the foreseeable future.
CNNMoney (New York) First published on February 13, 2017: 11:27 a.m. ET
