Market Overview

T-Mobile Remains A Major Takeover Target in Cellular (TMUS)

After a wave of consolidation in the U.S. cellular market, one major acquisition target remains – T-Mobile US (NYSE: TMUS).

According to AllThingsD, although the gains made by the company in its customer base in the second quarter were significant, the company remains on takeover radar as far as analysts are concerned.

Following T-Mobile’s merger with MetroPCS Communications (NYSE: PCS), AT&T Inc. (NYSE: T)’s pursuit of Leap Wireless International (NASDAQ: LEAP), and the one-two punch provided by Sprint (NYSE: S) scooping up Clearwire and subsequently selling a majority stake to SoftBank, analyst Chetan Sharma saw the writing on the wall.

“With this merger behind, all eyes are squarely focused on T-Mobile as to who makes the bid for [the] fourth-ranked operator in the next 6-12 months,” Sharma said Tuesday in a report.

Sharma added that T-Mobile’s gains cost the company both profit margin and average revenue per customer.

Among T-Mobile’s potential suitors, the “ever hungry for wireless assets” Dish Network (NASDAQ: DISH) led by CEO Charlie Ergen. The Wall Street Journal reported Tuesday that Ergen spelled out four possible deals, including a potential partnership with Sprint, a buyout of LightSquared, and even a merger with rival, DIRECTV (NASDAQ: DTV). Barring a partnership deal with Sprint, Ergen said, the only true acquisition path available to DISH would lie through T-Mobile.

Ergen added that, as opposed to Sprint, the “network upgrade” for T-Mobile would be “much simpler.” He also noted that T-Mobile has “a lot of momentum.”

Related: Verizon and AT&T Unveiling Plans to Compete with T-Mobile 'Jump' Plan

Billionaire hedge-fund manager, John Paulson, the largest outside investor in T-Mobile, told Bloomberg that, in addition to Dish, he also saw Sprint as a potential buyer of T-Mobile.

Paulson & Co., which specializes in acquiring stakes in companies involved in merger deals, bought a 2.3 percent position in T-Mobile when the company merged with MetroPCS in May. The hedge fund also owned shares of MetroPCS prior to the merger.

In a letter to clients, Paulson & Co. said, “While the merger closed, we continue to hold the stock as we believe that T-Mobile remains a potential takeover target for either Dish or Sprint.”

Shares of T-Mobile have grown more than 50 percent since the company bought MetroPCS May 1. Its current market value is $17.8 billion.

At the time of this writing, Jim Probasco had no position any mentioned securities.

Posted-In: AT&T Inc. Charlie Ergen Chetan Sharma ClearwireWall Street Journal Tech Media Trading Ideas Best of Benzinga

 

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