Verizon has brought back its unlimited data plan. This is great if you’re a Verizon customer. But it’s terrible news for its investors.
Verizon (VZ) The stock fell nearly 1.5% in early trading Monday. It’s now down about 10% year to date, making it the Dow’s worst showing of 2017.
Verizon’s decision is a clear sign that the company must do everything it can to remain competitive with its wireless rivals. AT&T (T), Sprint (Yes) And T Mobile (TMUS).
“In recent months, T-Mobile and Sprint have managed to take additional share from Verizon with their unlimited offerings,” Morgan Stanley analysts wrote in a report Monday morning.
That may explain why shares of T-Mobile and Sprint, now controlled by Japanese tech conglomerate SoftBank, are both up this year while Verizon is down. T-Mobile and Sprint are also closely linked as possible merger partners.
But the new telecom 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 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 a lot more 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 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 hoped the Verizon deal would close in the second quarter of this year. It was initially expected to be finalized in the first quarter.
However, in its latest earnings release, Verizon said only that it “continues to work with Yahoo to assess the impact of data breaches” – without expecting the deal to close in a near future.
Verizon has a lot on its plate, which could make investors nervous. In addition to the Yahoo deal, the company is also in the process of purchasing XO Communications’ fiber optic network. And it is selling its data center business to Equinix (EQIX).
Rumors have also swirled in recent weeks that Verizon might even consider buying a cable provider. Charter Communications (CHTR).
That may be more than Verizon can realistically handle right now. But perhaps nothing is out of the question for Verizon given how competitive the wireless world is these days.
Anything that could give Verizon a leg up on AT&T, Sprint and T-Mobile could be possible.
Related: Charter Shares Pop On Report Of Possible Verizon Takeover
Still, it’s worth noting that AT&T shares are also down 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 gigantic dividends.
Companies with high dividend yields haven’t performed this well since the election of Donald Trump. Investors are banking on a significant stimulus plan from him and the Republican Congress, which could be fueled in part by debt.
This has caused bond yields to rise, making shares of big dividend payers like Verizon much less attractive.
The Federal Reserve is also expected to raise interest rates several times this year. This could push bond yields even higher.
So Verizon faces many major challenges that could hurt its stock this year.
That’s why Verizon, nicknamed Big Red because of the crimson hue of its logo, could see its stock in the red for the foreseeable future.
CNNMoney (New York) First published February 13, 2017: 11:27 a.m. ET
