39% Annualized Return And AT&T
Chris DeMuth Jr. • 175 Comments
Chris DeMuth Jr. • 175 Comments
Going Long Leap Wireless: More Than A Leap Of Faith
Helix Investment Research
Helix Investment Research
Jul. 29, 2014, 12:14 PM
- "I’m skeptical it can be replicated," says Elevation LLC's Stephen Sweeney about Windstream's (WIN +12.9%) REIT spinoff plans. "It’s very unclear if other large cap companies can have their companies viewed by the IRS as real estate."
- UBS also has its doubts: It thinks AT&T (T +3.3%) and Verizon (VZ +1.8%) would have to open up their networks to rivals if they were spun off into REITs, something it doesn't think the carriers will be keen on doing.
- Oppenheimer's Tim Horan is more positive, albeit while cautioning Windstream's spinoff isn't a done deal. "If successful with this restructuring, and there are obviously high regulatory barriers, this will be a game changer for the valuation of non-REIT infrastructure stocks in our industry.”
- AT&T, Verizon, Windstream, Frontier (FTR +11.7%), and CenturyLink (CTL +4.2%) have pared their morning gains a bit amid volatile trading on very heavy volumes. AT&T has seen 66M shares trade vs. a daily average of 19.3M; Frontier has seen 89M trade vs. an average of 6.9M.
- Enthusiasm about Windstream's spinoff stems not only from the tax benefits provided to REITs - American Tower's tax expense has been halved since it converted into a REIT in 2012 - but also from the potential for spinoffs to spark new M&A activity.
- Windstream CFO Tony Thomas: "The REIT is going to be uniquely positioned to be in a great spot to help unlock value at other companies ... We have a good understanding of how the REIT opportunity could work in the telecom landscape."
- Earlier: Telcos soar following Windstream's REIT announcement
Jun. 30, 2014, 1:03 PM
- Carlos Slim is paying $5.6B to buy AT&T's (T +0.1%) 8.3% stake in America Movil (AMX +0.3%), according to SEC filings. With the stake worth $6.5B based on AMX's current market cap, Slim is getting a sizable discount in exchange for preventing AT&T from having to sell the shares through a public offering that could depress prices.
- The deal makes good on a promise by AT&T to unload the stake, and thus eliminate a conflict of interest and potential regulatory hurdle as the company gets set to buy DirecTV.
- DirecTV has 11.9M Latin American subs, and AT&T (with the help of DirecTV's spectrum) plans to use it to offer TV/broadband bundles in the region.
- Previous: Slim to buy AT&T's America Movil stake
Jun. 27, 2014, 3:54 PM
- Carlos Slim plans to buy AT&T's (T +0.4%) 8.3% stake in America Movil (AMX +4.4%). After accounting for the spike in AMX shares that has followed the news, the stake is currently worth $6.4B.
- The stake includes 24% of AMX's voting shares; its purchase further solidifies Slim's hold over the giant Latin American carrier as it continues expanding into Europe.
- AT&T announced in May it would sell its AMX stake to keep regulators happy as it acquires DirecTV, whose Latin American reach is substantial and set to get bigger post-acquisition. The sale will also help Ma Bell pay for the DirecTV deal's $14.6B cash component.
May 29, 2014, 4:15 AM
- Sprint (S) Chairman Masayoshi Son reasons that the rise in telecom and cable mergers should allow his company to buy rival T-Mobile (TMUS). Three big mergers have taken place in recent months with Verizon (VZ) acquiring Vodafone (VOD) for $130B, Comcast (CMCSA) buying Time Warner Cable (TWC) for $45B, and the AT&T (T) purchase of DirecTV (DTV) for $49B.
- "Access to the Internet is currently dominated by three giants with no sizable competitor," says Son.
- Although the company has not yet made a formal bid on T-Mobile, it looks to lay the framework for a future purchase.
- Antitrust authorities have previously frowned on such a deal, as it would cut the number of national competitors in the wireless industry to three from four.
May 20, 2014, 9:55 AM
- "I know there are reports out there that we are talking to Dish (DISH -2.3%). I can tell you now, that is someone's fantasy ... I don't think owning a satellite company is something I'm interested in at this point," says Verizon (VZ +0.1%) CEO Lowell McAdam in response to reports his company has held talks with Dish.
- As it is, there was plenty of skepticism Verizon, which just took on more than $60B in debt to help pay for Vodafone's Verizon Wireless stake, would turn its sights on Dish in response to AT&T's (T -0.8%) deal to acquire DirecTV.
- McAdam states Verizon's current focus is on rolling out OTT (Web-based) programming. The company bought out Intel's would-be Web TV unit in January, and has since said it's in talks with content providers to offer a Web/mobile TV service.
- If/when Verizon's service launches, it'll likely face competition from Dish, which plans to launch a Web TV service aimed at cord-cutters by year's end. It might also compete against AT&T, which hopes to launch a Web TV offering within 12-18 months of the DirecTV deal's closing.
- For each company, signing up content providers terrified of upsetting traditional pay-TV clients (and thus putting affiliate fees at risk) remains a challenge. Dish, for its part, has managed to get Disney/ESPN on board.
May 19, 2014, 10:00 AM
- If DirecTV's (DTV -2.2%) NFL Sunday Ticket deal isn't renewed on terms similar to the ones discussed, AT&T (T -2.1%) can walk away from the deal, AT&T discloses in an 8-K. DirecTV CEO Mike White says he's confident Sunday Ticket will be renewed by year's end.
- "The last six years for AT&T have been about data, the future is about delivering video at scale," declares AT&T CEO Randall Stephenson. He states AT&T is only paying for 30% of the deal in cash to keep its powder dry. Among other things, Ma Bell plans to spend up to $9B at next year's huge low-frequency spectrum auction, and will also participate in an auction for higher-frequency AWS spectrum.
- Also: 1) AT&T plans to grow its grow its broadband footprint by 15M homes (largely in rural areas), in part by offering fixed wireless services. 2) White says DirecTV is looking for M&A opportunities in Latin America. 3) AT&T promises DirecTV's services "will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers" for 3 years. 4) Cost synergies are expected to total $1.6B/year.
- AT&T and DirecTV are both lower. DirecTV shareholders get 1.905 AT&T shares for each DirecTV share if AT&T trades below $34.90 at closing time, and 1.724 shares if it trades above $38.58. They get an equity payoff equal to $66.50/share if AT&T trades between those two figures.
- More on AT&T/DirecTV
May 19, 2014, 1:56 AM
- AT&T (T) intends to sell its $6B, 8.4% holding in América Móvil (AMX) in order to avoid conflicts of interest from its proposed $48.5B acquisition of DirecTV (DTV) and "facilitate the regulatory approval process in Latin America."
- AT&T's representatives on América Móvil's board are set to resign.
- The deal will give AT&T a large presence in a region in which DirecTV has 18M customers, making it one of the largest pay-TV operators in Central and South America - along with América Móvil.
May 18, 2014, 5:14 PM
- As anticipated, AT&T (T) confirms it's acquiring DirecTV (DTV) in a stock-and-cash deal amounting to $95/share ($28.50/share in cash), just short of $50B total.
- Both boards were unanimous in approving the transaction. The companies say it's accretive within 12 months after close, on free cash flow per share and adjusted EPS basis, and that they expect the deal will "pass muster" with regulators.
- Previous coverage
May 17, 2014, 9:09 PM
- Bloomberg reports AT&T (T) aims to announce a DirecTV (DTV) deal by Monday. BuzzFeed reports AT&T is on track to make an announcement by Sunday. "The deal is done," says a source.
- Past reports put the deal's price around $50B; DirecTV closed with a market cap of $44B on Friday. The company also has a $20.8B debt load that needs to be accounted for, partly offset by $3B in cash and $2B in investments.
- Buying DirecTV would give AT&T 20.3M U.S. subs and 11.9M Latin American subs, plus a 41% stake in Mexican satellite TV provider Sky Mexico (6.1M subs) and access to the NFL's Sunday Ticket package.
- Though not cheap, the deal might make it easier for AT&T to keep supporting its hefty dividend (current yield of 5%). Oppenheimer thinks a 50/50 cash/stock deal at $100/share would lead AT&T to pay out only 55% of its 2016 free cash flow through dividends vs. 65% otherwise.
- More on AT&T/DirecTV
May 13, 2014, 11:00 AM
- Bloomberg and WSJ reports suggesting AT&T (T -1.3%) is close to a mega-deal for DirecTV (DTV +0.7%) (possibly worth over $66B after factoring net debt) are leading investors to bet Ma Bell won't be interested in making a bid for Vodafone (VOD -2.2%), something the company has been frequently rumored to be interested in exploring.
- AT&T CEO Randall Stephenson has already said "the window may be closing" on acquiring European assets, and has suggested he isn't thrilled with Vodafone's efforts to grow its wireline footprint via M&A.
- For his part, Vodafone CEO Vittorio Colao has hinted he's open to a deal, but has also made it clear his company will continue its wireline expansion strategy in the interim.
- AT&T, which didn't sell off following prior DirecTV reports, is off moderately today, as the Street expresses some concern over the potential $100/share price tag mentioned in Bloomberg's report.
- DirecTV (DTV +0.7%), meanwhile, has pared its AH gains and is now only trading near $88. Worries about regulatory approval might be playing a role; a Bloomberg source states AT&T and DirecTV are expecting a 12-month regulatory process for the deal.
May 12, 2014, 5:10 PM
- Bloomberg reports AT&T (T) is in "advanced talks" to acquire DirecTV (DTV) for ~$100/share - a 15% premium to DirecTV's Monday close, and a 29% premium to where shares traded before the WSJ's May 1 report about deal talks.
- The acquisition price values DirecTV at $51B, or over $66B after factoring net debt.
- Bloomberg adds that under discussed plans, DirecTV CEO Mike White plans to retire after 2015.
- DTV now +5.6% AH to $92.
- Earlier: AT&T/DirecTV deal could reportedly be announced in two weeks
May 12, 2014, 4:32 PM
- The WSJ reports AT&T (T) and DirecTV (DTV) are discussing a cash/stock deal that could be announced in as soon as two weeks.
- The paper adds adds AT&T is likely to pay a premium to Dish's current stock price.
- Though a merger would be costly - DirecTV currently goes for over 17x 2015E EPS after factoring over $15B in net debt - AT&T investors have been signaling they aren't bothered by a deal that stands to increase AT&T's bundling opportunities, while also lower the telco's exposure to both its slumping wireline voice ops and a mobile business that's beginning to see tougher price competition.
- DTV +1.5% AH
- Last week: DirecTV reportedly talking with advisers about AT&T deal
May 7, 2014, 4:09 PM
May 1, 2014, 3:14 AM
- AT&T (T) has approached DirecTV (DTV) about buying the satellite-TV provider in a deal that could be worth at least $40B, the WSJ reports. DirecTV, whose market cap is $39.5B, is open to a deal.
- The combined company would have almost 26M pay TV subscribers vs the 30M that Comcast would have if it acquires Time Warner Cable.
- As with the Comcast-TWC deal, a major question is whether regulators would authorize a tie-up between AT&T and DirecTV, with broadband competition likely to be the main issue in any review.
Apr. 28, 2014, 12:40 PM
- The FCC plans to add 128.5MHz. of spectrum to its screening procedures for vetting mergers and spectrum sales. Sprint (S -4.1%) owns 101MHz. of the spectrum, via its acquisition of Clearwire and its valuable 2.5GHz. band spectrum (good for urban areas).
- The rule change, due for a May 15 vote, relates to the FCC's scrutiny of deals that give a carrier more than 1/3 of all spectrum in a particular market. Sprint will exceed that threshold in most big markets once the change goes through.
- Though Sprint won't be forced to sell spectrum in those markets, it could have a much harder time adding to its spectrum position within them via M&A - say, through a merger with T-Mobile USA (TMUS -3.6%).
- Separately, the FCC plans to provide tougher scrutiny of deals that would lead to a single carrier having over 1/3 of all quality low-frequency (sub-1GHz., better for buildings and rural areas) spectrum in a market, and to limit how much a carrier with such a spectrum position can bid in 2015's anticipated low-frequency auctions.
- AT&T (T +1.3%) and Verizon (VZ +1.5%), which together control a giant share of low-frequency U.S. mobile spectrum, are the companies targeted by those proposals. Sprint, T-Mobile, and other rivals have been pressuring the FCC to limit how much spectrum AT&T and Verizon can buy in the 2015 auction.
Mar. 13, 2014, 4:45 PM
- The FCC's approval of AT&T's (T -0.1%) purchase of Leap (LEAP +0.7%) and its high-frequency spectrum assets was widely expected. While regulators have been nervous about AT&T/Verizon's huge share of low-frequency mobile spectrum, smaller rivals Sprint and T-Mobile have considerable high-frequency assets of their own.
- In addition to the spectrum, the deal gives Ma Bell Leap's 4.6M prepaid subs and the Cricket brand. The latter will be replacing AT&T's own Aio prepaid brand.
- Leap shareholders have already approved the deal. They'll be getting $15/share ($1.2B) in cash, as well as proceeds from the sale of low-frequency spectrum Leap acquired for $204M.
AT&T, Inc. provides telecommunication services and products, including wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking and wholesale services. It operates business... More
Industry: Telecom Services - Domestic
Country: United States
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