Here's Why AT&T (T) Really Dropped its T-Mobile Bid...
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Overall Analyst Rating:
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EPS Growth %: -8.3%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 6.5%
EPS Growth %: -8.3%
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Why did AT&T (NYSE: T) drop its bid for T-Mobile, even though it knew it faced a massive breakup fee? A theory:
Last quarter, T-Mobile reported that total contract customer losses were 186,000, compared with 312,000 prepaid additions. As anyone following the wireless realm knows, post-paid customers are much more lucrative than prepaids.
In its filing, T-Mobile also said: "The quarter-over-quarter improvement in net customer additions was driven by improvements in both contract and prepaid gross additions resulting from the introduction of unlimited Value plans discussed above and growth of prepaid unlimited Monthly 4G plans. This growth may be impacted in the fourth quarter of 2011 due to competitor launches of the [Apple (Nasdaq: AAPL)] iPhone 4S."
Further, earlier in December, Streetinsider highlighted a J.P. Morgan note that Apple's iPhone 4S was driving growth for Verizon (NYSE: VZ), AT&T, and Sprint (NYSE: S), in the fourth-quarter, but also saw T-Mobile losing 400,000 subs as a result of being the only U.S. carrier without an iPhone offering.
So, was it really federal antitrust issues that killed the deal, or the fact that AT&T might have been paying well over $1,000 per contract customer, without any guarantees of further losses.
Following the report, AT&T shares are down 0.6 percent, as most of the news was priced in.
Last quarter, T-Mobile reported that total contract customer losses were 186,000, compared with 312,000 prepaid additions. As anyone following the wireless realm knows, post-paid customers are much more lucrative than prepaids.
In its filing, T-Mobile also said: "The quarter-over-quarter improvement in net customer additions was driven by improvements in both contract and prepaid gross additions resulting from the introduction of unlimited Value plans discussed above and growth of prepaid unlimited Monthly 4G plans. This growth may be impacted in the fourth quarter of 2011 due to competitor launches of the [Apple (Nasdaq: AAPL)] iPhone 4S."
Further, earlier in December, Streetinsider highlighted a J.P. Morgan note that Apple's iPhone 4S was driving growth for Verizon (NYSE: VZ), AT&T, and Sprint (NYSE: S), in the fourth-quarter, but also saw T-Mobile losing 400,000 subs as a result of being the only U.S. carrier without an iPhone offering.
So, was it really federal antitrust issues that killed the deal, or the fact that AT&T might have been paying well over $1,000 per contract customer, without any guarantees of further losses.
Following the report, AT&T shares are down 0.6 percent, as most of the news was priced in.
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