T-Mobile, Dish Deal Good For Tower Stocks, Bad For Sprint And AT&T, BofA Says

In a report published Monday, BofA Merrill Lynch analyst David W. Barden said that a combination of DISH Network Corp DISH and T-Mobile US Inc TMUS would be positive for the tower stocks and negative for Sprint Corp S and AT&T Inc. T.

According to The Wall Street Journal, Dish and T-Mobile continue to be in the preliminary stages of a possible merger, despite ongoing talks since September last year. The only thing that has reportedly been decided is that T-Mobile's CEO John Legere would become the CEO of the combined entity.

Analyst David W. Barden mentions that if the information is true, it is an indication that:

• Dish and Charlie Ergen are "trying to flush out all potential bidders in the market" for the company
• Dish is trying to assess the "broader appetite" for T-Mobile
• "DT is trying to flush out bidders for TMUS"

"On a large chess board, DISH flushing out a bidder for TMUS could leave Softbank looking for an exit vehicle from Sprint, which has long been DISH's preferred target," Barden said.

Although the default argument making the rounds is that Ergen wants an entry into the wireless business, Barden disagrees, saying that Dish may be looking to augment the satellite video business it has with wireless broadband capacity.

"Sprint is most negatively affected among the wireless carriers as bulls have hoped that a more favorable regulatory environment could lead to a S/TMUS merger. Among the big 2, AT&T is most exposed as a T-Mobile’s competitive intensity could bleed over into the DBS space, though T would retain its material scale and content advantage," the report stated.

Barden has an Underperform rating on T-Mobile and a price objective of $25.