T-Mobile Pauses Some 5G Deployments amid Pending Sprint Merger

T-Mobile (TMUS) has paused some of its 5G network deployment efforts amid its pending Sprint (S) merger.

T-Mobile and Sprint merger

According to a LightReading report, T-Mobile is “suspending new purchase orders for network equipment for the remainder of 2019.” According to the report, the company said that “we are managing capital expenditures as we do every year, and we continue to invest billions to build out our network aggressively, expanding LTE coverage and performance while simultaneously laying the foundation for broad, nationwide 5G in 2020.”

A T-Mobile spokesperson added that “this kind of adjustment is par for the course when running a wireless network and managing billions in annual capex. We monitor and adjust our expenditures to ensure we meet both our network expansion goals and fiscal commitment.”

T-Mobile’s capital expenditures

T-Mobile has been continuously investing in capex to enhance its network. In the second quarter, the company spent $1.66 billion on cash capex, excluding capitalized interest, compared to $1.53 billion in the second quarter of 2018. The year-over-year increase was due to growth in the network build. T-Mobile continued the rollout the 600 MHz lower-band spectrum and started laying the groundwork for 5G technology. The company expects its cash capex for 2019, excluding capitalized interest, to be at “the very high end of $5.8 billion to $6.1 billion,” according to a company spokesperson.

Lawsuit to block T-Mobile and Sprint merger

In July, T-Mobile’s merger with Sprint received regulatory approval from the Department of Justice. Last month, the FCC’s chairman, Ajit Pai, formally recommended approving the transaction. However, the merger agreement faces a lawsuit from a group of state attorneys general to block the transaction. The lawsuit alleges that the merger deal is anti-competitive and will increase prices for wireless consumers nationwide. The antitrust trial is scheduled to start on December 9.

On Tuesday, Illinois Attorney General Kwame Raoul joined the lawsuit opposing the Sprint and T-Mobile merger. Currently, the District of Columbia and 16 states want to stop the mega-merger of the third and fourth-largest mobile operators in the US.

According to a Reuters report on Tuesday, “With fewer companies competing, customers would face fewer choices, higher prices, less innovation and lower quality service, Illinois Attorney General Kwame Raoul said in a statement.”

T-Mobile and Sprint stock fell

T-Mobile stock fell 1.2% on Tuesday and closed at $77.13. The stock fell 0.8% in the trailing one-month period. Notably, the stock is trading 9.5% lower than its 52-week high of $85.22. The stock is trading 28.6% higher than its 52-week low of $59.96.

Although the stock fell in the trailing one-month period, it has risen 21.3% since the beginning of 2019 and 16.8% in the trailing 12-month period. Sprint and AT&T (T) have risen 9.7% and 10.8%, respectively, in the trailing 12-month period. On Tuesday, Sprint stock fell 1.3% and closed at $6.70, while AT&T stock rose 0.3% to $35.38.

As of Tuesday, T-Mobile’s market capitalization was $65.9 billion. The company is the third-largest US mobile operator in terms of market capitalization. Sprint’s market capitalization was $27.4 billion, while AT&T’s market capitalization was $258.5 billion.

Analysts’ recommendations

Among the 21 analysts covering T-Mobile, 81% or 17 analysts recommend a “buy,” while 19% or four analysts recommend a “hold.” None of the analysts recommend a “sell.” T-Mobile’s consensus 12-month target price is $88.53, which indicates a 14.8% return potential. About 11% or two of the 19 analysts tracking Sprint recommend a “buy.”

Technical levels

Based on the closing price on Tuesday, T-Mobile stock was trading 0.4% below its 20-day moving average of $77.47, 0.6% below its 50-day moving average of $77.58, and 1.2% above its 100-day moving average of $76.24. The company’s 14-day relative strength index score is 47, which suggests that investors are neutral toward the stock.

In the trading session on Tuesday, T-Mobile stock closed near its Bollinger Band mid-range level of $77.47. The value implies that the stock isn’t oversold or overbought.

T-Mobile’s current 14-day MACD (moving average convergence divergence) is 0.18. The positive score implies an upward trading trend for the company. The MACD marks the difference between T-Mobile’s short-term and long-term moving averages. Sprint’s 14-day MACD is -0.05, while AT&T’s 14-day MACD is 0.30.

To learn more about the merger deal, read T-Mobile: Oppenheimer’s Views before Sprint Merger and T-Mobile Asks Court to Clear the Sprint Merger.

Update: An earlier version of this article suggested that T-Mobile was halting its 5G buildout rather than pausing some 5G deployments. The earlier version also suggested that T-Mobile expected cash capex between $5.4 billion and $5.7 billion for fiscal 2019 rather than “the very high end of $5.8 billion to $6.1 billion.”