Market Overview

Gabelli & Co On Dish T-Mobile Merger Rumor: 'Dish It Up! Buy'

Share:
Related DISH
Watch These 8 Huge Call Purchases In Friday Trade
How To Value CBS In Light Of Radio Segment Spinoff
FCC incentive spectrum auction to end after current stage (Seeking Alpha)
Related
The Market In 5 Minutes: Big Bank Earnings, GM Guidance And #GoldenShowerGate
T-Mobile: From Turnaround Story To Industry Powerhouse
FCC incentive spectrum auction to end after current stage (Seeking Alpha)

Shares of T-Mobile US Inc (NYSE: TMUS) surged to fresh 52-week highs of $40.77 on Thursday, while shares of DISH Network Corp (NASDAQ: DISH) were higher by more than 6 percent after The Wall Street Journal reported the two companies are in merger talks.

In a report published Thursday afternoon, Sergey Dluzhevskiy of Gabelli & Company noted that the report shouldn't be viewed as a surprise.

"As we've stated in the past, we view Dish Network as the most likely near-term buy of T-Mobile," Dluzhevskiy wrote.

According to Dluzhevskiy, Dish Network needs to find a way to create value from its "vast" spectrum assets and begin utilizing or monetizing them while also de-risking its legacy business. A combined company would create an entity with over 150 MHz of spectrum nationwide, a figure that is slightly higher than AT&T Inc. (NYSE: T) spectrum depth and also 40 MHz greater than those under Verizon Communications Inc. (NYSE: VZ)'s control.

Related Link: T-Mobile, Dish Network In Merger Talks

Dluzhevskiy continued that a combination of a sizeable wireless business with "strong" operating momentum coupled with Dish's "vast" spectrum portfolio could "turbo-charge" T-Mobile's growth and enhance the value of the combined entity.

Other Players?

However, Dluzhevskiy stated that there could be other companies with an interest in acquiring T-Mobile.

For example, Comcast Corporation (NASDAQ: CMCSA) may need to decide sooner rather than later if it needs to own a wireless business (instead of partnering with one) to avoid placing itself in a competitive disadvantage in the future. There is also an outside chance that a foreign firm (such as America Movil SAB de CV (NYSE: AMX), Altice, Iliad, etc) shows interest in acquiring T-Mobile, he said.

Bottom line, Dluzhevskiy maintained a Buy rating on T-Mobile as shares should command a 7.0-7.5x FY multiple in a buyout/consolidation scenario.

The analyst's 2016 PMV (private market value) stands at $49 per share (based on a 7.25x 2016P EBITDA multiple). At a 7-7.5x EBITDA, shares could be worth $47 to $52.

Latest Ratings for DISH

DateFirmActionFromTo
Aug 2016MacquarieUpgradesNeutralOutperform
Jul 2016WunderlichDowngradesHoldSell
Jun 2016Moffett NathansonDowngradesNeutralSell

View More Analyst Ratings for DISH
View the Latest Analyst Ratings

Posted-In: Dish Network Gabelli And Company Sergey DluzhevskiyAnalyst Color Long Ideas M&A Analyst Ratings Trading Ideas

 

Related Articles (CMCSA + AMX)

View Comments and Join the Discussion!