39% Annualized Return And AT&T
Chris DeMuth Jr. • 175 Comments
Chris DeMuth Jr. • 175 Comments
Sep. 11, 2014, 2:05 PM
- The state attorneys general now working with the Justice Department to determine whether Comcast's deal to buy Time Warner Cable is legal have expanded their investigation to include AT&T's (T +0.2%) proposed $48.5B deal to buy DirecTV (DTV +0.1%), Reuters reports.
- New York and California are part of the multi-state review, according to the report.
Sep. 1, 2014, 1:56 AM
- America Movil (NYSE:AMX) has hired Bank of America (NYSE:BAC) to sell a significant amount of its wireline/mobile assets, in order to lower its market share by less than 50%.
- Potential buyers include AT&T (NYSE:T) and SoftBank (OTCPK:SFTBY), a source tells Bloomberg.
- The move is in response to new Mexican regulation designed to curb the company's dominance. America Movil announced the sale in July.
Aug. 25, 2014, 12:25 PM
- The NY Post reports AT&T (T +0.1%) has reached an agreement with the DOJ that paves the way for the agency to clear the DirecTV (DTV +0.8%) merger. No details are given on what conditions AT&T has agreed to.
- Regulators have been expected to sign off on the $48.5B merger, in spite of concerns about its potential impact on pay-TV prices in areas where AT&T and DirecTV currently compete.
- AT&T has tried to appease regulators by promising (among other things) to continue offering DirecTV's services on a standalone basis for 3 years, and to make big rural broadband investments.
- In addition to the DOJ, the FCC is reviewing the merger.
Aug. 22, 2014, 10:03 AM
- Vodafone (VOD +1.3%) is paying €72.7M ($97M) to acquire a 72.7% stake in Greek broadband/phone service provider Hellas Online. The deal will bring Vodafone's total stake above 91%, and is expected to close in Q4.
- Hellas had 519K customers at the end of 2013, good for an estimated 11% local share. It had 2013 revenue of €227.4M, and EBITDA of €68.4M.
- The deal follows Vodafone's acquisitions of German cable provider Kabel Deutschland and Spanish cable provider ONO, as the carrier pushes ahead with its goal of offering mobile/wireline bundles (both by itself, and via partnerships) throughout Europe.
- Separately, The Daily Mail has passed on a rumor that AT&T's (NYSE:T) advisers are now "working around the clock on a cash bid worth more than £3 a share" for Vodafone.
- The rumor should be taken with a heavy dose of salt, given: 1) AT&T is currently preoccupied with closing the DirecTV acquisition. 2) It implies AT&T would be paying a 46% premium to Vodafone's current London trading price, and valuing the company at ~$130B. 3) AT&T, which has a $179B market cap and $84B in debt, would be very hard-pressed to finance a ~$130B deal solely with cash.
- A 6-month prohibition on an AT&T bid for Vodafone ended in July. However, AT&T CEO Randall Stephenson stated in March "the window may be closing" for his company to acquire European wireless assets, and is reportedly unhappy with Vodafone's wireline expansion efforts.
Jul. 31, 2014, 1:02 PM
- France's Iliad (OTC:ILIAF) is offering $15B in cash for a 56.6% stake in T-Mobile USA (TMUS +7.3%) at a price of $33/share. Iliad values the remaining 43.4% at $40.50/share. Sprint (S -5.3%) has been reported to be planning a ~$40/share deal.
- Iliad says it has obtained financing from unnamed banks, and would also do a capital raise to help pay for the deal. One issue: Iliad has a current market cap of just $16B, less than T-Mobile's $24.8B and Sprint's $30.6B. Sprint has reportedly lined up a $40B+ debt package to finance a T-Mobile deal.
- A source tells the WSJ Iliad, which has upended the French mobile market with its aggressive pricing, views a T-Mobile merger as a "one-time opportunity to enter the world's-largest telecoms market."
- Iliad also thinks (perhaps with good reason, given FCC/DOJ remarks) regulators will be more comfortable with its bid than Sprint's, since Iliad has no U.S. presence.
- AT&T (T -2%) and Verizon (VZ -2.3%) have joined Sprint in selling off, as investors mull the possibility of a deal that would leave the number of nationwide U.S. carriers at 4. Concerns about Iliad's pricing history might also be weighing on shares.
- Related tickers: OTCPK:SFTBF, OTCQX:DTEGY
- Earlier: Iliad reportedly bids for T-Mobile USA
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