Hang-Up: How to Play AT&T's Scuttled T-Mobile Bid
In what probably isn't the biggest surprise to many investors and telecom industry insiders, Dow component AT&T (NYSE: T) has dropped its $39 billion takeover bid for Deutsche Telekom's (PK: DTEGY) T-Mobile unit. Had the deal been successful, AT&T would have retaken the crown as the largest U.S. wireless carrier. Instead, the company will take a $4 billion charge, which was previously announced, in the current quarter.
These things can happen when both the Federal Trade Commission (FTC) and the Justice Department oppose a takeover.
“AT&T will continue to be aggressive in leading the mobile Internet revolution,” said Randall Stephenson, AT&T chairman and CEO, in a statement. “Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds – connecting smartphones, tablets and emerging devices at a record pace – and we are well under way with our nationwide 4G LTE deployment."
Stephenson also urged policymakers to "enact legislation to meet our nation's longer-term spectrum needs." That's the way to go down fighting. Kidding aside, there are some winners here, so let's have a look at some now.
Sprint (NYSE: S): Think Sprint isn't happy about this news? Think again. Arguably, no company was as opposed to AT&T's overtures for T-Mobile as Sprint was and the stock is reacting accordingly, trading higher by almost 8% in the after-hours session. Still, Sprint shares really need to pop above $2.50 to become appealing from a technical perspective.
CenturyLink (NYSE: CTL): One of the highest yielders in a sector known for its robust dividend yields, CenturyLink probably isn't all that sad that AT&T will pass on T-Mobile. CenturyLink is the dominant rural telecom provider in the U.S. and the less big telecoms like AT&T encroach on its territory, the better for shareholders.
Verizon (NYSE: VZ): Verizon, also a Dow component, is probably smiling right now. It can retain the crown as largest U.S. wireless provider. Not to mention, had T-Mobile fallen into AT&T's hands, the pickings would have been that much slimmer for Verizon's next big wireless acquisition, assuming the company is even interested in doing a mega-deal. Even better for shareholders may be the prospect that Verizon will have learned from AT&T's problems with the Feds and not even bother attempting a major deal.
AT&T Why not? Yeah, it stinks to lose that $4 billion breakup fee, but that still means $35 billion isn't going out the window. It wasn't a total waste of a day for AT&T investors. The company boosted its annual dividend by 2.3% to $1.76 per share. That makes for the 28th consecutive year of increased dividends. By keeping $35 billion in house, AT&T should be able to raise the dividend again and perhaps ratchet up share repurchases.
iShares Dow Jones US Telecom ETF (NYSE: IYZ): The biggest of the telecom ETFs with almost $504 million in assets under management, the iShares Dow Jones US Telecom ETF devotes 19% of its weight to AT&T. So even if one views AT&T as a big loser here, more than 80% of IYZ's holdings are probably rejoicing AT&T won't be acquiring T-Mobile.
Dwayne Wade: Hey, there were no guarantees AT&T would have kept D-Wade in their commercials had the acquisition gone through. Same goes for the girl in the pink dress that has become synonymous with T-Mobile ads.
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