Jun. 5, 2014, 12:17 PM
- With worries about the DOJ/FCC's willingness to approve a Sprint (S -2.6%)/T-Mobile (TMUS -2%) merger still running high, shares of both carriers are now lower following reports stating they've largely agreed to the terms of cash/stock deal that would value T-Mobile at ~$40/share.
- T-Mobile is now 16% below the rumored acquisition price. A deal would reportedly require Sprint to pay ~$16B in cash, issue a similar amount of stock, and assume $9B worth of net debt.
- Sprint already had $26.6B in net debt at the end of Q1, and has since used its receivables to land a $1.3B credit facility.
- The WSJ reports Sprint would pay T-Mobile a $1B+ breakup fee consisting of cash and other assets if the deal is shot down. T-Mobile received a $4B breakup fee from AT&T ($3B in cash) in 2011 after regulators derailed their planned merger.
Jun. 4, 2014, 5:56 PM
- Bloomberg reports Sprint (S) and T-Mobile USA (TMUS) are near an agreement for a deal that would value T-Mobile at ~$40/share. The WSJ is also reporting a ~$40/share price.
- S +3.7% AH. TMUS +3.2% to $36.02 - a price that points to ongoing regulatory worries.
- Sprint's offer will reportedly feature a 50-50 cash/stock split, and leave Deutsche Telekom (DTEGY), which currently owns 67% of T-Mobile, with a 15% stake in the combined company. Bloomberg's sources state an announcement could happen by July.
- In addition, the carriers are reportedly close to agreeing on a breakup fee - Sprint and parent SoftBank (SFTBF) have reportedly been pushing for a smaller breakup fee for a deal that's bound to face tough DOJ/FCC scrutiny; T-Mobile and Deutsche Telekom have wanted a bigger one.
- More on Sprint/T-Mobile
Jun. 3, 2014, 4:07 PM
- Verizon (VZ -1.5%), Sprint (S -2.2%), and T-Mobile (TMUS -1%) have each closed lower after AT&T guided for no Q2 wireless service revenue growth, and a weak wireless service EBITDA margin.
- Investors have already been nervous about the impact a T-Mobile-driven price war stands to have on the top and bottom lines of rivals. AT&T mentioned adoption of its Mobile Share Value plans, which saw price cuts after T-Mobile announced a series of aggressive moves, are pressuring its ARPU.
- Verizon, though offering some modest promotions, has generally stuck to a premium pricing strategy; its disappointing Q1 postpaid subscriber adds - 539K net adds with an estimated 95K decline for phones - fueled questions about whether a strategy change is needed. The fact AT&T expects to add 800K+ postpaid subs in Q2 might heighten those concerns.
- Sprint has been more aggressive than Verizon, launching its low-cost Framily plans in January and heavily promoting them. But it lost 231K postpaid subs in Q1 as it scrambles to neutralize Verizon/AT&T's 4G coverage leads.
- One encouraging AT&T datapoint: The carrier expects ~2/3 of postpaid smartphone subs to be on subsidy-free Mobile Share Value plans by year's end. Both AT&T and peers have made slashing subsidy spend a priority.
May. 29, 2014, 9:12 AM
- Japan's Kyodo news agency reports Deutsche Telekom (DTEGY) has signed off on a SoftBank (SFTBF)/Sprint (S) bid to acquire its 67% stake in T-Mobile USA (TMUS).
- DT has previously suggested it's open to a deal as SoftBank/Sprint worked to line up financing - in addition to T-Mobile's equity, a deal has to account for $8.7B in net debt.
- But all signs suggest regulators remain wary of a tie-up lowering the number of nationwide U.S. mobile carriers to three, in spite of Masayoshi Son's relentless PR efforts.
- TMUS +1.6% premarket. S +2.5%.
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. 19, 2014, 2:35 PM
- Sources tell dealReporter Verizon (VZ +0.1%) has held talks with Dish (DISH -0.3%). Dish shares are near breakeven after trading lower much of the day in response to the AT&T/DirecTV deal.
- AT&T/DirecTV has fueled speculation Verizon could counter with an offer for Dish, which owns a large chunk of high-frequency spectrum that could be used to offer 4G services. But there has also been a fair amount of skepticism, particularly given Verizon just spent $130B to buy Vodafone's Verizon Wireless stake.
- Analyst Craig Moffett: "Dish Network has just been left standing ... That Verizon might be a buyer is more wishful thinking than it is analysis." Wells Fargo thinks Verizon might bid for Dish's spectrum, but not the whole company.
- The deal has also renewed speculation Dish will try to merge with T-Mobile (TMUS +2.1%), which could face tough regulatory opposition to a merger with Sprint.
- Reuters reported in December Dish is weighing an offer for the #4 U.S. carrier, and Charlie Ergen has said a deal is a possibility.
May. 15, 2014, 1:56 PM
- The FCC has voted 3-2 to restrict how much spectrum AT&T (T +0.2%) and Verizon (VZ -0.2%) can buy in next year's huge low-frequency spectrum auctions.
- Sprint (S +3.4%) and T-Mobile (TMUS +1.9%) have both lobbied aggressively for restrictions to be placed on AT&T/Verizon, who between them have a huge share of low-frequency mobile spectrum (better for rural/in-building coverage).
- The decision shortly follows a similar vote in favor of chairman Tom Wheeler's net neutrality proposal - it doesn't prohibit pay-for-priority deals with content providers, but does seek comment on whether they should be banned, as well as on whether other neutrality regulations should be imposed.
- The FCC is also set to vote on a spectrum cap rule change for vetting mergers/acquisitions. Sprint and T-Mobile are hoping that one doesn't pass.
May. 15, 2014, 3:30 AM
- Sprint's (S) pursuit of T-Mobile (TMUS) could receive unexpected support from Jessica Rosenworcel, a Democratic commissioner at the Federal Communications Commission.
- Rosenworcel has privately said that the carriers might not be able to remain viable if they stay independent, the WSJ reports.
- However, while the two GOP commissioners are seen as more likely to back a deal, FCC Chairman Tom Wheeler and the Justice Department are not so keen due to concerns about the impact on competition.
May. 11, 2014, 2:09 AM
- Deutsche Telekom (DTEGF) wants Sprint (S) to agree to a breakup fee of over $1B in the event that regulators block the latter's possible acquisition of T-Mobile US (TMUS), the WSJ reports.
- The German carrier also wants Sprint to pledge to keep the T-Mobile brand and some of its management.
- Deutsche Telekom's demands come after regulators implied they would view any Sprint/T-Mobile tie-up skeptically. Three years ago, Deutsche received $3B when authorities blocked the sale of T-Mobile to AT&T.
- The sides are working on forging a deal in the near term, but could wait until after a government auction of wireless airwaves - which is expected in 2015 - or under a different White House administration.
- The operators might have a bit more clarity next week, when the FCC is due to decide on how much spectrum carriers can hold and the rules for the spectrum auction.
May. 1, 2014, 9:13 AM
May. 1, 2014, 8:01 AM
- Thanks to aggressive pricing and a slew of promotions, T-Mobile (TMUS) added 1.3M branded postpaid subs (1.2M phone subs), 465K branded prepaid subs, and 600K non-branded subs in Q1. The branded postpaid figure dwarfs Verizon's (VZ) 539K and AT&T's (T) 625K - the difference in phone adds is even larger - and compares with a net loss of 333K for would-be suitor Sprint (S).
- Regulators mulling a Sprint/T-Mobile tie-up are doubtlessly paying attention, and the same goes for AT&T and Verizon: The former has responded more aggressively to T-Mobile's price cuts thus far than the latter.
- Thanks to the strong Q1 numbers, which come after T-Mobile added 1.645M total subs (869K branded postpaid) in Q4, the carrier now expects 2.8M-3.3M branded postpaid net adds in 2014, up from a prior 2M-3M. Cash capex is still expected to be in a range of $4.3B-$4.6B.
- At the same time, T-Mobile's strategy continues taking a near-term toll on its bottom line: Adjusted EBITDA fell 26% Y/Y to $1.09B, and T-Mobile has cut its full-year adjusted EBITDA guidance to $5.6B-$5.8B from $5.7B-$6B. Adjusted EBITDA margin fell 400 bps Q/Q to 20%.
- Service revenue rose 4.5% Y/Y to $5.34B. Branded postpaid churn fell 20 bps Q/Q and 40 bps Y/Y to 1.5% (a new record). ARPU fell $0.69 Q/Q to $50.01. "Simple free cash flow" (adjusted EBITDA - cash capex) was $141M, down from $357M in Q4 and $239M a year ago.
- TMUS +7.6% thanks to the sub adds and a Bloomberg report stating Sprint has lined up financing for a bid. Sprint +6.2%. T-Mobile parent Deutsche Telekom (DTEGY) is up 2.9% in Frankfurt.
May. 1, 2014, 6:30 AM
Apr. 30, 2014, 6:03 PM
- Bloomberg reports Sprint (S) "plans to push forward" with a T-Mobile USA (TMUS) bid after lining up financing from six banks.
- SoftBank's (SFTBF) Masayoshi Son is expected to "make a formal bid in June or July," according to one source. SoftBank is still reportedly talking to T-Mobile parent Deutsche Telekom (DTEGF) about who would run the post-merger company; outspoken T-Mobile chief John Legere is the top candidate.
- While past reports have suggested financing will be available - Sprint is expected to absorb T-Mobile's $8.7B in net debt in the event of a deal - DOJ officials are apparently quite skeptical about the merits of a deal to merge the #3 and #4 U.S. mobile carriers.
- Son has previously argued he would launch a massive price war if a Sprint/T-Mobile deal was cleared, and would also offer competitive home broadband services (could be easier said than done in high-density urban areas).
- Sprint announced yesterday it lost 333K postpaid subs in Q1. T-Mobile, which reports tomorrow, has been faring better lately.
Apr. 30, 2014, 5:40 PM
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.
Apr. 24, 2014, 10:10 AM
- Verizon (VZ -2%) had only 539K wireless postpaid net adds in Q1 (549K total), down from 677K a year ago (720K total) and for once below AT&T's quarterly postpaid figure of 625K. Also, retail churn rose 7 bps Y/Y to 1.37%, and retail postpaid churn 6 bps to 1.07%.
- Those figures raise the question of whether Verizon's commitment to a premium pricing strategy in the face of a T-Mobile-launched price war is impacting subscriber adds.
- Nonetheless, wireless service revenue grew 7.5% Y/Y, nearly even with Q4's 8% and much better than AT&T's 2.2%. Wireless op. margin rose 210 bps to 35%, and retail postpaid ARPA 6.3% to $159.67. Verizon ended Q1 with 103.3M retail connections (97.3M postpaid).
- Wireline revenue fell 0.4%, as 4.4% and 6.4% declines in enterprise and wholesale revenue (caused in part by voice weakness) offset a 6.2% increase in consumer retail (driven by 15.5% FiOS growth). Wireline op. margin rose 10 bps to 1.5%.
- 98K and 57K FiOS Internet and TV subs were respectively added, down from 126K and 96K in Q4. Total broadband connections (FiOS or otherwise) rose 1.5% to 9M.
- Q1 free cash flow was $3.93B, below net income of $5.99B but above illustrative net income of $3.8B. Verizon is still expecting 4% 2014 revenue and EBITDA growth. Its dividend yield stands at 4.6%.
- Sprint (S -3.2%) and T-Mobile (TMUS -2%) are following Verizon lower. They fell yesterday in the wake of AT&T's report. Sprint reports on April 29
- Q1 results, PR,
TMUS vs. ETF Alternatives
Other News & PR