Shares of Telecom Drop Along with iPhone Prices

Telecom is down nearly 2% on the day as AT&T stated they would sell iPhone 3GS for $49 versus the current $99. Competition is heating up as Verizon launches the iPhone later this year and WalMart already lowered the price on the iPhone. Metro PCS stated their fourth-quarter subscriber rate slowed over the previous quarter. Competition from AT&T and Verizon is the logical reason. The disappointing news comes on the heels of the upbeat outlook for tablets and increase in wireless demand and takes back the gains from yesterday.

Vanguard Telecom Services ETF (VOX) was down 1.9% on the day. T fell 3.2%, VZ was off 4.1% and PCS was down 6.8% on the day. What does this mean for the broader sector? I remain optimistic looking forward and it could become a opportunity worthy of digging through the sector looking for the leaders. Sprint (S) is flat on the day and I am looking for the stock to make a break through the current downtrend line off the May high. The move would be worth watching for a play near term. Clearwire (CLWR) which is building out the 4G network for Sprint has been under pressure from the debt load, made a nice bounce off the near term support at $5. News that Sprint (majority owner of Clearwire) would start selling the Blackberry PlayBook tablet sent the shares higher. The unlimited 4G data service they will offer with the tablet might gain market share from AT&T and Apple.

Level 3 Communications (LVLT) has bounced off support at 95 cents and look positive short term. US Cellular remains in a positive uptrend as well. Scanning the 20 stocks which make up VOX, half are in positive uptrend and the others are trading sideways. The outlook is positive relative the future growth and I would look for the buying opportunity created in any additional selling.

We continue to monitor the progress in the sector and will add to the Watch List as opportunities arise.

 

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