Wall Street Lines Up AT&T/T-Mobile Deal Winners & Losers: (T) (VZ) (AAPL) (ALU) (S) (CCI)
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Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 6.5%
Revenue Growth %: -0.3%
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Last night, StreetInisder.com released its list of winners and losers from the AT&T (NYSE: T) mega-deal to acquire T-Mobile USA for $39 billion. Today, a number of Wall Street's finest have also weighed-in with their thoughts on the winners and losers. Below is a summary:
WINNERS:
Goldman Sachs: "AT&T has committed to a significant break-up fee, including $3 bn in cash plus certain spectrum rights. Perceived regulatory approval risks will be an overhang, in our view. AT&T looks to be offering regulators broadband expansion into rural areas."
Goldman Sachs "VZ is the peer best positioned to benefit from any uncertainty while the proposed deal is evaluated, while for the industry structural benefits could accrue longer-term."
Deutsche Bank: “AT&T indicates it will spend $8bn in 'incremental' Capex and we believe over time AT&T's 4G/LTE equipment suppliers (ERIC & ALU in radio access, ALU in IP) should benefit from supplying equipment for AT&T's enlarged network. In the short-term there could be volatility in both T-Mobile's and AT&T's Capex due to merger planning and integration, although strong data trends in our view dictate a continuation of network and capacity upgrades in the mid-term.
Wedbush: "Synchronoss appears to be the biggest beneficiary in our coverage universe as AT&T (53% of revenue) is its largest customer for activation and provisioning services while T-Mobile is not a customer."
Wells Fargo: “In our view, the 7x+ multiple paid for the T-Mobile asset could bode well for both LEAP & PCS’ given current valuations (trading under 6x).”
LOSERS:
Goldman Sachs: This deal will likely be a negative for Sprint, as it was the company perceived to "need" a combination with TMobile more than any other. This also remove the other viable option that CLWR (Nasdaq: CLWR) had (T-Mobile).
Collins Stewart: "With this announcement it is clear that Deutsche Telekom (NYSE: DT) is not about to merge with Sprint (NYSE: S) (as many had recently speculated) or even create a network sharing agreement that would lower the costs of their respective 4G deployments. Although the announcement clearly pushes Sprint and Clearwire closer together, making Sprint appear more expensive (nearly 8.0x 2012 Est. PF EBITDA), we also note that it likely eliminates a likely wholesale customer or even purchaser of the 20Mhz of Clearwire (Nasdaq: CLWR) spectrum that had actively been shopped.
Wells Fargo: “Longer term, this news represents a challenge for Sprint. The wireless model is very scalable and Sprint will now be a distant number 3 player to VZ. We believe Sprint has to look on its own partnerships with a renewed sense of urgency. In our view, a near-term move with CLWR likely will come about so as not to lose its 4G messaging and continue to differentiate its service offerings. Near term, we believe S is in a position to gain meaningful share from T-Mobile as it will likely continue to market around its best value offering. S could also be in a position to put regulatory pressure on and shift some of the hot button issues (i.e. special access) more in its favor.”
Jefferies: "Besides the long-term market share issue we highlighted above, we note that NSN is the major supplier of wireless infrastructure to LightSquared. That 4G network deployment, of course, is still getting off of the ground (many industry participants have concerns about the viability of the network). We note that LightSquared was pursuing a wholesaling strategy to other wireless operators without a 4G network plan. One of those prospective customers was TMobile USA. Now, in the wake of this deal, T-Mobile USA won’t require LightSquared’s services and the viability of Light Squared gets a bit more uncertain."
Wedbush “We also see a slight negative impact for Nokia and RIM on the device front as the iPhone will likely take some share.”
Goldman Sachs "As part of its $39 bn planned agreement to acquire T-Mobile USA, AT&T is committing to significantly expand its 4G LTE coverage. Previous plans included intentions to cover roughly 80% of the US. Under the proposed merger, AT&T intends to deploy to 95% of the US population, or 46.5 mn incremental pops. The increased coverage is expected to primarily target rural markets"
WINNERS:
- AT&T (NYSE: T) (Winner):
Goldman Sachs: "AT&T has committed to a significant break-up fee, including $3 bn in cash plus certain spectrum rights. Perceived regulatory approval risks will be an overhang, in our view. AT&T looks to be offering regulators broadband expansion into rural areas."
- Verizon (NYSE: VZ) (Winner):
Goldman Sachs "VZ is the peer best positioned to benefit from any uncertainty while the proposed deal is evaluated, while for the industry structural benefits could accrue longer-term."
- Apple (Nasdaq: AAPL) (Winner):
- Alcatel-Lucent (NYSE: ALU) (Winner):
Deutsche Bank: “AT&T indicates it will spend $8bn in 'incremental' Capex and we believe over time AT&T's 4G/LTE equipment suppliers (ERIC & ALU in radio access, ALU in IP) should benefit from supplying equipment for AT&T's enlarged network. In the short-term there could be volatility in both T-Mobile's and AT&T's Capex due to merger planning and integration, although strong data trends in our view dictate a continuation of network and capacity upgrades in the mid-term.
- Tekelec (Nasdaq: TKLC) (Winner):
- Atlantic Tele-Network (Nasdaq: ATNI) (Winner):
- Synchronoss Technologies, Inc. (Nasdaq: SNCR) (Winner):
Wedbush: "Synchronoss appears to be the biggest beneficiary in our coverage universe as AT&T (53% of revenue) is its largest customer for activation and provisioning services while T-Mobile is not a customer."
- Amdocs Ltd. (NYSE: DOX) (Winner):
- Openwave (Nasdaq: OPWV) (Winner):
- Comverse Technology Inc. (OTC: CMVT) (Winner):
Wells Fargo: “In our view, the 7x+ multiple paid for the T-Mobile asset could bode well for both LEAP & PCS’ given current valuations (trading under 6x).”
LOSERS:
Goldman Sachs: This deal will likely be a negative for Sprint, as it was the company perceived to "need" a combination with TMobile more than any other. This also remove the other viable option that CLWR (Nasdaq: CLWR) had (T-Mobile).
Collins Stewart: "With this announcement it is clear that Deutsche Telekom (NYSE: DT) is not about to merge with Sprint (NYSE: S) (as many had recently speculated) or even create a network sharing agreement that would lower the costs of their respective 4G deployments. Although the announcement clearly pushes Sprint and Clearwire closer together, making Sprint appear more expensive (nearly 8.0x 2012 Est. PF EBITDA), we also note that it likely eliminates a likely wholesale customer or even purchaser of the 20Mhz of Clearwire (Nasdaq: CLWR) spectrum that had actively been shopped.
Wells Fargo: “Longer term, this news represents a challenge for Sprint. The wireless model is very scalable and Sprint will now be a distant number 3 player to VZ. We believe Sprint has to look on its own partnerships with a renewed sense of urgency. In our view, a near-term move with CLWR likely will come about so as not to lose its 4G messaging and continue to differentiate its service offerings. Near term, we believe S is in a position to gain meaningful share from T-Mobile as it will likely continue to market around its best value offering. S could also be in a position to put regulatory pressure on and shift some of the hot button issues (i.e. special access) more in its favor.”
- Tower Stocks - American Tower Corp. (NYSE: AMT), Crown Castle International Corp. (NYSE: CCI), SBA Communications Corp. (Nasdaq: SBAC) (Losers):
- LM Ericson (Nasdaq: ERIC) (Loser):
Jefferies: "Besides the long-term market share issue we highlighted above, we note that NSN is the major supplier of wireless infrastructure to LightSquared. That 4G network deployment, of course, is still getting off of the ground (many industry participants have concerns about the viability of the network). We note that LightSquared was pursuing a wholesaling strategy to other wireless operators without a 4G network plan. One of those prospective customers was TMobile USA. Now, in the wake of this deal, T-Mobile USA won’t require LightSquared’s services and the viability of Light Squared gets a bit more uncertain."
- Nokia (NYSE: NOK) (Loser):
Wedbush “We also see a slight negative impact for Nokia and RIM on the device front as the iPhone will likely take some share.”
- Research in Motion (Nasdaq: RIMM) (Loser):
- Neutral Tandem (Nasdaq: TDMN) (Loser):
- Nuance (Nasdaq: NUAN) (Loser):
- DirectTV (NYSE: DTV) and Dish Network Corp. (DISH) (Losers):
- Convergys Corporation (NYSE: CVG) (Loser):
Goldman Sachs "As part of its $39 bn planned agreement to acquire T-Mobile USA, AT&T is committing to significantly expand its 4G LTE coverage. Previous plans included intentions to cover roughly 80% of the US. Under the proposed merger, AT&T intends to deploy to 95% of the US population, or 46.5 mn incremental pops. The increased coverage is expected to primarily target rural markets"
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