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 ( Shares fell nearly 1.5% in early trading on Monday. It’s now down 10% so far this year, making it the Dow’s worst performer of 2017. )
Verizon’s move is a clear signal that the company must do everything it can to remain competitive with wireless rivals. AT&T (, )Sprint ( i )T-Mobile (. )
“In recent months, both T-Mobile and Sprint have had some success picking up additional Verizon stock under their unlimited offers,” Morgan Stanley analysts wrote in a report Monday morning.
That may explain why shares of T-Mobile and Sprint, which is now controlled by Japanese tech conglomerate SoftBank, are up this year while Verizon is down. T-Mobile and Sprint have also been perennially linked as potential merger partners.
But the new telecom price war isn’t the only problem for Verizon.
AT&T recently acquired satellite broadcasting provider DirecTV, a move that makes Ma Bell more competitive against Verizon in the battle for control of people’s living rooms. Verizon offers its own FiOS broadband TV service.
Related: Verizon Offers 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 (. Verizon already owns AOL and is looking to buy Yahoo’s core assets to bolster its own digital content offerings. )
But the yahoo ( The deal could fall apart in the wake of revelations of massive data breaches at Yahoo over the past few years. )
Yahoo recently said it expects the deal with Verizon to close in the second quarter of this year. Initially it was supposed to end in the first quarter.
However, in its latest earnings release, Verizon simply said it “continues to work with Yahoo to assess the impact of the data breaches,” not that it expected the deal to close anytime soon.
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 buying XO Communications’ fiber optic network. And sells its data center business to Equinix (. )
There have also been rumors in recent weeks that Verizon might consider buying a cable provider Communications of the Charter (. )
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 an edge over AT&T, Sprint and T-Mobile could be possible.
Related: The letter’s shares appeared in a report of a possible takeover of Verizon
Still, it’s worth noting that AT&T shares are also down 5% this year. And Verizon and A&T have something in common that Sprint and T-Mobile don’t: Verizon and AT&T pay gigantic dividends.
Companies with high dividend yields haven’t fared so well since Donald Trump was elected. Investors are betting on a major stimulus package from him and the Republican Congress, which may be fueled in part by debt.
This has sent bond yields higher, making stocks of big dividend payers like Verizon much less attractive.
The Federal Reserve is expected to raise interest rates a few times this year as well. That could push bond yields even higher.
So Verizon faces a lot of big challenges that could hurt its stock this year.
That’s why Verizon, nicknamed Big Red because of the crimson hue 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 am ET