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Verizon Keen to Lease Data Center for 5G Push in Sacramento?


Verizon Communications Inc. VZ is in talks with Sacramento to lease the 5,000 square-foot property near City Hall as a data center, which once housed the city’s information technology department in 2014. The property has been lying vacant since then.

City spokesperson Marycon Young feels that the space, located in Suite 190 of the City Hall garage on I Street, between 10th and 11th streets, is already equipped with the necessary infrastructure, eliminating the need for a large-scale upgrade.

Push for 5G Initiative in Sacramento?

Though Young confirmed that the city is in talks with Verizon about leasing the property, she declined to comment on whether this data center will be tied to the partnership between Verizon and the city to establish 5G wireless service and smart-city technology in Sacramento. The partnershipallows the company to install more than 100 small-cell towers around Sacramento to initiate its 5G cellular service. Under the partnership, 27 city parks are to be covered with free WiFi, and smart-city technology is to be established across the city to make the streets safer. Verizon had expressed interest in the property back in early 2017 when the 5G partnership was on the verge of getting finalized.

Verizon plans to launch next-generation 5G wireless residential broadband services in three to five U.S. markets in 2018. The first commercial launch is scheduled in Sacramento, CA, in the second half of 2018. Additional details of this launch and the announcement of other markets will be unveiled later. During the first application of 5G wireless network, Verizon will be using millimeter-wave spectrum (radio signals) instead of copper or fiber cables, to provide customers with unmatched wireless speeds for Internet access. Verizon has started conducting field trials for its upcoming 5G wireless network with partners. The company is looking at mobile hotspot and home-based fixed wireless for initial deployment of the next-generation 5G wireless networks in the U.S. in 2018. A full phased 5G wireless network is likely to be offered in 2020.

Verizon’s returns have been fluctuating for the past three months. On an average, it was below or on par with the general decline of the industry. One of the reasons for this performance was the drop in Verizon’s postpaid phone customers. However, toward the end of April, Verizon saw a relative improvement, with an average loss of 2.3% for the past three months compared with a decline of 6.7% for the industry. Whether the new lease will act as a center to carry out the 5G initiative is still unconfirmed. However, if it holds true, it is likely to attract more investors and boost shares.

Zacks Rank and Stocks to Consider

Verizon currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the space are BlackBerry Limited BB and TIM Participacoes S.A. TSU, sporting a Zacks Rank #1 (Strong Buy) and SITO Mobile, Ltd. SITO holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackBerry has an expected long-term earnings growth rate of 18.56%.

TIM has an expected long-term earnings growth rate of 32.98%.

SITO Mobile has an expected long-term earnings growth rate of 25%.

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