On November 8, Arkansas joined the other eight states that support the US Department of Justice’s (or DOJ) decision to approve the proposed T-Mobile (TMUS) and Sprint (S) merger deal. The other states are Colorado, Florida, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, and South Dakota.
On Friday, the DOJ’s antitrust chief, Makan Delrahim, stated, “We are gratified that Arkansas shares our view of the tremendous benefits to competition that will arise out of the proposed consent judgment.”
He added, “A combined T-Mobile and Sprint, coupled with competition from Dish, will provide increased value to residents of Arkansas and consumers nationwide.”
Regulators approved the T-Mobile-Sprint merger deal
In July, the DOJ approved the pending $26.5 billion merger deal between the country’s third- and fourth-largest wireless carriers. The DOJ reached a settlement with T-Mobile and Sprint to recommend approval of the deal. Under the terms of the settlement, Sprint would divest its wireless prepaid businesses to Dish Network (DISH) for about $1.4 billion. These businesses include Boost Mobile and Virgin Mobile.
Additionally, Sprint would divest its nationwide 800 MHz spectrum assets to Dish for about $3.6 billion. The proposed new T-Mobile would make its wireless network available to Dish Network for seven years. The combined entity must also make cell sites and retail locations available to Dish. The settlement is subject to court approval.
Dish Network is likely to be the fourth-largest wireless carrier in the US after the divestiture deal is completed. DISH has been losing traditional video customers due to stiff competition from online streaming video services like Netflix and Amazon.
In the third quarter, Dish lost net 66,000 traditional pay-TV customers compared to 367,000 net losses in the third quarter of 2018. Dish’s traditional pay-TV subscriber count fell 7.7% YoY (year-over-year) to 9.5 million on September 30. However, Dish added 214,000 Sling TV net customers in the third quarter of 2019.
Last week, the FCC also formally blessed the T-Mobile and Sprint merger deal. The new T-Mobile is committed to deploying a 5G wireless network across the US.
T-Mobile and Sprint merger concerns
The T-Mobile-Sprint merger agreement faces a lawsuit that was filed by the attorneys general of 15 states and the District of Columbia. The states argue that the combination is harmful for competition and wireless consumers. California and New York are leading the lawsuit. A district court trial is scheduled to begin next month.
In October, Colorado dropped out of the court challenge filed to stop the merger deal and now supports it. The state reached a settlement with T-Mobile and Dish Network.
Earlier this month, the merger agreement between T-Mobile and Sprint expired. The two companies are in discussions to extend it. According to a November 8 Reuters report, T-Mobile CEO John Legere “declined to rule out requesting the $26 billion price be reduced.”
T-Mobile plans to launch its 5G service next month. Last week, the telecom company announced three Un-carrier initiatives aimed to win support for the merger deal. Please read T-Mobile Announced Un-Carrier Initiatives to Boost Merger to learn more.
Analysts’ recommendations and target prices
T-Mobile has the most “buy” ratings among its peers. About 81% of analysts surveyed by Reuters rated T-Mobile as a “buy” as of November 11 while the remaining 19% rated it as a “hold.” T-Mobile’s high “buy” rating might reflect its improved financial position. These ratings could indicate T-Mobile’s ability to tap more market share from rivals as it invests heavily to build out its wireless network. T-Mobile’s average target price of $89.74 implies about 11% upside potential from the current price levels.
Sprint has the most “hold” ratings among its peers. About 82% of analysts surveyed by Reuters rated Sprint as a “hold.” Plus, 12% of these analysts rated it as a “sell,” and the remaining 6% rated it as a “buy.” Sprint’s average target price of $6.30 implies about 3% upside potential from the current price levels.
About 48% of analysts surveyed by Reuters rated AT&T (T) as a “buy,” and 48% rated it as a “hold.” The remaining 4% rated it as a “sell.” AT&T’s average target price of $38.56 implies about 2% downside potential from the current price levels.
On November 8, T-Mobile stock fell 1.1% and closed at $80.94, with a market cap of $69.3 billion. Currently, the stock is trading 5% below its 52-week high of $85.22 and 35% above its 52-week low of $59.96. The stock generated a 16% return in the trailing 12-month period. Plus, it generated a 4.3% return in the last month and -1.9% in the trailing five-day period.
On November 8, T-Mobile stock closed 1.3% and 2.8% above its 50- and 100-day moving averages of $79.90 and $78.72, respectively. The stock closed 0.8% below its 20-day moving average of $81.56.
As of November 8, T-Mobile stock has returned 27.2% year-to-date. Sprint and AT&T also rose year-to-date, gaining 5% and 38%, respectively.