Verizon’s new plan: Consumers win, investors lose

Verizon has introduced again its limitless knowledge plan. That is nice when you’re a Verizon buyer. However it’s horrible information for its buyers.

Verizon (VZ) inventory fell practically 1.5% in early buying and selling Monday. It is now down about 10% to this point this yr, making it the Dow’s worst performer of 2017.

Verizon’s transfer is a transparent signal the corporate has to tug 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 further 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 doable merger companions.

However the brand new telecom value struggle is not the one drawback 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 gives its personal FiOS broadband TV service.

Associated: Verizon brings again limitless knowledge plans

And AT&T can also be making a a lot greater wager on content material, with plans to buy CNN’s guardian firm Time Warner (TWX). Verizon already owns AOL and is seeking to purchase the core property of Yahoo to bolster its personal digital content material choices.

However the Yahoo (YHOO) deal may collapse 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 imagined to be finalized by the primary quarter.

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

Verizon has lots on its plate, which might be making buyers nervous. Along with the Yahoo deal, the corporate can also be within the course of of shopping for the fiber optic community of XO Communications. And it is promoting its knowledge heart enterprise to Equinix (EQIX).

There even have been rumors previously few weeks that Verizon may even think about shopping for cable supplier Constitution Communications (CHTR).

Which may 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 as of late.

Something that might give Verizon a leg up on AT&T, Dash and T-Cellular may be doable.

Associated: Constitution shares popped on report of doable 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.

Firms which have large dividend yields have not fared as properly since Donald Trump was elected. Traders are betting on a large stimulus bundle 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 massive dividend payers like Verizon lots much less enticing.

The Federal Reserve is anticipated to boost rates of interest a couple of instances this yr too. That would push bond yields even increased.

So Verizon faces many large challenges that might damage its inventory this yr.

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

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