Texas, once a critic of the proposed T-Mobile (TMUS) and Sprint (S) merger, now backs the deal. Texas attorney general Ken Paxton was the only Republican attorney general to sue to block the T-Mobile–Sprint merger deal.
However, T-Mobile and Sprint convinced Paxton with some specific commitments. On November 25, Paxton made public that he has reached an agreement with T-Mobile to settle the state’s antitrust concerns against the pending merger. As a result, Paxton agreed to drop out of the multistate lawsuit and support the T-Mobile–Sprint deal.
Under the terms of the agreement, the proposed new T-Mobile can’t hike prices for Texans for mobile services for five years after the close of the deal. Additionally, the combined company promised to launch a 5G wireless network across Texas within the next six years.
In a statement, Paxton said, “My office is responsible for protecting consumers and this settlement ensures that the New T-Mobile is not in a position to overcharge Texans for wireless service, and at the same time, obligates the New T-Mobile to invest in a high-quality 5G network that will serve the needs of Texas’ growing economy, or face stiff financial penalties.”
He added, “Our objectives in joining the initial lawsuit were to protect Texans from unnecessary price hikes and to ensure that Texans living in both urban and rural areas will not get stuck with substandard service as the market for wireless telecommunication services evolves to adopt new standards of technology with the power to transform the Texas economy. This agreement achieves those objectives.”
Currently, the District of Columbia and about 13 Democratic state attorneys general are trying to stop the merger contract. New York Attorney General Letitia James is leading the case. The states argue that the combination of third- and fourth-largest wireless carriers is anti-competitive and harmful to American wireless consumers. The case trial is set to start on December 9.
According to a FierceWireless report on November 25, Wells Fargo analysts said, “Although the number of states fighting the deal has declined, the case will still go to trial if even one state remains in the lawsuit.”
The US Department of Justice and the FCC have conditionally approved the merger contract between T-Mobile and Sprint. The two companies agreed to divest Sprint’s prepaid business and a certain spectrum to pay-TV operator Dish Network (DISH) for $5 billion.
On November 14, T-Mobile announced that after the merger deal closes, new T-Mobile would build its fourth of five planned Customer Experience Centers in New York’s Nassau County. The others are in Kingsburg, California, Rochester, New York, and Overland Park, Kansas.
On November 7, T-Mobile announced its plans to launch three new “un-carrier” initiatives if the proposed $26 billion merger goes through. The initiatives are Project 10 million, Connecting Heroes, and T-Mobile Connect. See T-Mobile Announced Un-Carrier Initiatives to Boost Merger to learn more.
On November 20, New York Attorney General Letitia James stated that T-Mobile’s new promises weren’t enough to address the antitrust concerns cited in the multistate lawsuit.
History of the T-Mobile–Sprint merger
This is the third time T-Mobile and Sprint are trying to merge. In 2014, the merger discussions collapsed due to antitrust concerns. And in 2017, the two companies ended merger talks as they couldn’t reach mutually agreeable terms.
T-Mobile and Sprint both want to get closer to telecom giants like Verizon and AT&T (T). In the quarter that ended on September 30, T-Mobile added 754,000 postpaid phone net customers. AT&T added 101,000 postpaid phone net customers. Meanwhile, Sprint lost 91,000 postpaid phone net customers.
Analysts’ price targets
Wall Street is bullish in general on T-Mobile stock. Around 16 of the 21 surveyed analysts recommend a “buy” while five say “hold.” None recommend a “sell.” The median target price of $93 for the T-Mobile stock translates to an upside of over 19% for the T-Mobile stock.
T-Mobile’s peer stocks AT&T and Sprint are trading 8.7% and 1.0% below analysts’ respective median price targets.
In 2019, T-Mobile stock is up about 22.6% while Sprint has surged only 2%. Both stocks hit 52-week highs on July 26 after the US DOJ approved the merger deal. However, T-Mobile stock has mainly been range-bound since then, while Sprint has been notably weak. AT&T stock reported returns of 30.6% year-to-date through November 25.
T-Mobile stock fell about 0.8% on November 25 and closed the trading day at $78.00. Based on that price, the stock reported returns of -0.2% in the last five trading days, -4.4% in the trailing month, and 16.3% in the trailing 12 months.
On November 25, T-Mobile closed 2.2% below its 20-day moving average of $79.72 and 2.1% below its 50-day moving average of $79.68. It was also trading 1.3% below its 100-day moving average of $79.01.
Finally, T-Mobile’s 14-day MACD is -0.61, which suggests a downward trading pattern. The stock’s 14-day RSI score of 43 means it’s neither oversold nor overbought. On November 25, it closed near its middle Bollinger Band level of $79.72, which also means it’s neither oversold nor overbought.