Macquarie Analyst Surprised By Surge in T-Mobile (TMUS) on DISH Network (DISH) Takeover Reports

Macquarie analyst Kevin Smithen weighed in on news DISH Network (NASDAQ: DISH) and T-Mobile (NYSE: TMUS) are in merger talks.

Smithen said they are a little surprised by the premarket 12% move in TMUS shares and remind investors that "DT holds the keys to T-Mo and that there are no guarantees that minority shareholders will be happy with the price in what is likely to be a mostly-stock deal with a 12-15 month regulatory review with required spectrum divestitures of at least 20-30MHz, in our view."

In addition, " Amy has written that a spectrum sale or JV was the preferred outcome for DISH shareholders. As such, we think that there could be selling pressure on both shares once the initial pop on deal synergies is finished. We like the commanding spectrum position of the combined company although we don't think this is what the FCC had in mind for DISH's spectrum (preferring a buildout) and will most likely require substantial spectrum sales. Sling and access to programming create some interesting opportunities long-term although DISH will lack the scale of larger video players in negotiations with content providers. We note that DISH has not yet finalized its AWS-3 spectrum with the FCC so that further complicates regulatory negotiations. Other things to consider is whether this deal will distract T-Mo's mgmt. and derail its near term momentum. Furthermore, it remains to be seen whether Legere can work under Ergen long-term, in our view."

For AT&T (NYSE: T), this deal gives credibility to T's vision of convergent quad play services in the U.S. and T will have more scale in video and wireless than DISH as well as a 12-18 month time to market advantage, in their view.

For Verizon Communications (NYSE: VZ), the pure-play on US wireless appears to be boxed-in here, in their view as its decision to shrink its FiOS video business may come back to haunt it.

For Sprint Corp. (NYSE: S), bears will no doubt say that Sprint lost out on its long-term end game partner (although no one expected this deal before at least 2017) and while we agree a Sprint - T-Mo deal would have had the most compelling synergies and 4-3 player consolidation would have been constructive for the industry, Sprint could have many better capitalized suitors or partners with more scale than DISH long-term including Comcast, Altice, Charter and perhaps Google or Amazon.

You May Also Be Interested In

• Sony/Apollo bid for Paramount could be worth as much as $29 billion - Source
• London Stock Exchange Group Plc. (LSEG:LN) (LNSTY) PT Raised to GBP88 at HSBC
• BMO Capital Reiterates Outperform Rating on National Health Investors (NHI)