Verizon has reintroduced its unlimited data plan. This is great news for Verizon customers, but not so great for investors.
Verizon (VZ) stock dropped nearly 1.5% in early trading on Monday. It is now down about 10% for the year, making it the worst performer on the Dow in 2017.
Verizon’s decision is a clear indication that the company is striving to stay competitive with wireless rivals AT&T (T), Sprint (S) and T-Mobile (TMUS).
“T-Mobile and Sprint have managed to capture additional market share from Verizon in recent months due to their unlimited data offerings,” noted Morgan Stanley analysts in a report on Monday morning.
This could explain why T-Mobile and Sprint, both of which have been linked as potential merger partners, have seen their stocks rise this year while Verizon’s stock has fallen.
However, the new telecom price war isn’t the only challenge Verizon is facing.
AT&T recently acquired satellite broadcast provider DirecTV in a move that made it more competitive against Verizon in the battle for control over people’s living rooms. Verizon already offers its own FiOS broadband TV service.
Related: Verizon reintroduces unlimited data plans
AT&T is also placing a big bet on content by planning to purchase CNN’s parent company Time Warner (TWX). Verizon, on the other hand, already owns AOL and is looking to acquire the core assets of Yahoo to enhance its digital content offerings.
Nevertheless, the potential Yahoo deal could fall apart due to the revelations of massive data breaches at Yahoo over the past few years.
Yahoo recently stated that it hopes the deal with Verizon will be finalized in the second quarter of this year, although it was originally projected to close in the first quarter.
However, in its latest earnings release, Verizon simply said that it is “continues to work with Yahoo to assess the impact of data breaches,” giving no indication as to when the deal might be completed.
Verizon has a lot on its plate at the moment, which may be causing unease among investors. In addition to the Yahoo deal, the company is also in the process of acquiring the fiber optic network of XO Communications and selling its data center business to Equinix (EQIX).
There have been recent rumors that Verizon may even consider purchasing cable provider Charter Communications (CHTR).
This may be more than Verizon can handle currently. However, in the fiercely competitive wireless market, Verizon may be willing to consider any opportunity that gives it an advantage over AT&T, Sprint, and T-Mobile.
Related: Charter shares rise on rumors of possible Verizon takeover
However, it is worth noting that AT&T’s stocks have also declined this year, down about 5%. Both Verizon and AT&T share one advantage that Sprint and T-Mobile lack – they both have significant dividend yields.
Companies with large dividend yields have not fared well since Donald Trump’s election. Investors are anticipating a substantial stimulus package from him and the Republican Congress, which may be partly financed through debt.
As a result, bond yields have risen, making stocks with high dividend payments like Verizon less appealing.
The Federal Reserve is also expected to raise interest rates a few times this year, which could further increase bond yields.
Therefore, Verizon faces several significant challenges that could hurt its stock this year.
This is why Verizon, also known as Big Red due to its crimson logo, may see its stock remain in the red for the foreseeable future.
CNNMoney (New York) First published February 13, 2017: 11:27 AM ET
