Bloomberg has reported that the federal government has filed an anti-trust complaint against the proposed AT&T/T-Mobile merger. That could be enough to put an end to Ma Bell’s plan for dominating the US mobile phone market.

As bad as the news is for AT&T, it’s very good news for Sprint, which is soon to begin selling the iPhone from Apple Inc. (NASDAQ: AAPL) If the proposed merger were to go through, Sprint would have been left so far behind AT&T and Verizon Wireless that it would have faded into insignificance. Sprint’s once-discussed merger with T-Mobile could go back on the table again. That combination would at least give the combined company a fighting chance against AT&T and Verizon Wireless.

Now, though, AT&T is faced with a problem. It’s growth engine for the past three years, the iPhone, will be in not just one, but two competitors’ hands. And without its exclusive deal on the iPhone, AT&T could face some rough times if the T-Mobile deal is killed. What does AT&T do to post some growth now? That’s not a rhetorical question.

Shares in AT&T are off more than -3% on the news, at $28.63, in a 52-week range of $26.50-$31.94. Deutsche Telekom shares are off nearly -5%. Sprint shares are up more than 7.5%, to $3.82, in a 52-week range of $2.98-$6.45. Leap Wireless is up about 0.3%, and MetroPCS is up more than 1%. Clearwire is up nearly 7%, at $3.08, in a 52-week range of $1.32-$.82. America Movil is up nearly 3%, at $24.92, in a 52-week range of $21.86-$29.82.

Verizon Communications Inc. (NYSE: VZ), which owns 60% of Verizon Wireless, is down nearly -1% and Vodafone Group plc (NASDAQ: VOD), which owns the other 40% of Verizon Wireless, is down about -0.5%.

Sprint and Clearwire get a reprieve, and all the other mobile phone carriers get the piece of the gold mine. AT&T and Deutsche Telekom get the shaft.

Paul Ausick

MetroPCS’s proposed merger with competitor Leap Wireless International Inc. (NASDAQ: LEAP), first mentioned in 2007, is once more being discussed as MetroPCS expands its board of directors to include two nominees put forward by private equity firm Pentwater Capital Management LP, which owns about 4.8% of MetroPCS’s stock. Such a deal would have made more sense four years ago, but Leap’s share price has fallen by nearly -88%, from around $95/share to around $11.50 this morning.

MetroPCS has also seen its costs rise much more steeply than its profits. Its cost per gross addition reached $177.88 in the second quarter, up about 8%, and its average revenue per user rose to $40.49, up just over 1.6%. That is not a recipe for success.

And the company is not getting any help from Verizon Communications Inc. (NYSE: VZ), AT&T (NYSE: T), Apple Inc (NASDAQ: AAPL), or even Sprint Nextel Corp. (NYSE: S). The rising demand for smartphones has forced MetroPCS to offer, and promote, its own offerings which may be turning away the very customers that the company has depended on for so long. This is not a fight that MetroPCS can win, with AT&T selling the iPhone 3GS for just $49 with a two-year service contract.

Even if the company could get an iPhone deal and continue to build out its 4G network, the indications are pretty strong that Apple’s iPhone 5 is not going to support 4G. And other 4G phones are still priced at about $200 with a two-year contract and at least double without. Again, that is pretty steep for MetroPCS’s customer base. Why the company is promoting 4G so heavily, especially when it is not producing results, is a mystery.

The strength of AT&T and Verizon Wireless threaten the very existence of Sprint and does nothing to help either MetroPCS or Leap.  A merger of MetroPCS and Leap is likely only to delay their inevitable demise. Both AT&T and Verizon Wireless offer pre-paid phones, and though the pre-paid service is not their preferred business, the two giants could pretty easily eliminate MetroPCS and Leap.

America Movil, S.A.B. de C.V. (NYSE: AMX), which has now offered to pay 6.5 billion for the 40.4% share of Telefonos de Mexico (Telmex) that it doesn’t already own, is may be interested in picking up the customers of either MetroPCS or Leap, or both. Leap would likely be the Mexican giant’s first choice because it would be much cheaper than MetroPCS. Increasing regulatory pressure in Mexico is hurting America Movil’s margins, and the company may decide to turn north for growth.

At mid-morning, MetroPCS shares are off almost -31%, at $11.17, within a 52-week range of $8.25-$18.79. Leap Wireless shares are off nearly -16%, at $10.97, in a 52-week range of $9.51-$17.66. Leap reports earnings tomorrow, and expectations are low – an EPS loss of -$0.50 on revenue of about $780 million, which is substantially higher than a year ago, but reflects the higher costs Leap is facing as well.

Paul Ausick

No money was injured while filming

We have noticed a near-record wave of stock splits of late despite the trend of today where companies have tended to prefer high share prices over record share prices.  We also have several key splits coming up this week that investors will need to pay attention to.  These are from Six Flags Entertainment Corp. (NYSE: SIX), America Movil S.A.B. de C.V. (NYSE: AMX), Lululemon Athletica Inc. (NASDAQ: LULU), and MAXIMUS, Inc. (NYSE: MMS) are all executing their splits this week.

Basic price data and an impact has been listed if applicable.

Six Flags Entertainment Corp. (NYSE: SIX) declared its 2-for-1 stock split back on May 5 and the ex-date is June 28.  Shares were trading at $73.74 on the split date and they closed at an adjusted basis of $72.82 on Monday.

America Movil S.A.B. de C.V. (NYSE: AMX) is not one we routinely follow.  It has already declared a 2-for-1 stock and Yahoo! Finance lists June 30 as the payable date, with July 1 as the ex-date as the data that the share price reflects the adjusted price.

Lululemon Athletica Inc. (NASDAQ: LULU) announced the yoga split of 2-for-1 back on June 9, and its payable date is June 30 with an ex-date of July 1.  That means that it will reflect the split this coming Friday. Shares were at $86.14 before the split was announced, but now shares are up at $108.58 and an all-time high of $108.99 was hit Monday.

MAXIMUS, Inc. (NYSE: MMS) declared a 2-for-1 stock split back on May 9, and it has a payable date of June 30 with an ex-date that will reflect the adjusted share price of July 1.  Shares were at an adjusted $79.46 before it announced the split and $83.26 after its split, but now shares are at $80.71.

As a reminder, stock splits change nothing fundamentally under the shares.

JON C. OGG

AFLAC (NYSE: AFL) Raised to Neutral from Sell at UBS.
America Movil (NYSE: AMX) Raised to Buy at Citigroup.
Corning (NYSE: GLW) Raised to Buy at UBS.
Coca-Cola Femsa (NYSE: KOF) Raised to Buy at BofA/Merrill Lynch.
General Mills (NYSE: GIS) Raised to Overweight at Morgan Stanley
Hartford Financial (NYSE: HIG) Started as Buy at UBS.
Tiffany (NYSE: TIF) Started as Buy at Citigroup
TJX Companies (NYSE: TJX) Raised to Conviction Buy List (was Buy) at Goldman Sachs.

You can join our open email distribution list which goes out several times per week for reminders of the top day trader alerts, analyst upgrades and downgrades, IPO’s, key secondary offerings, guru investor data on Buffett and others, mergers, and more.

JON C. OGG
OCTOBER 6, 2009

Aetna (AET) Raised to Neutral at Goldman Sachs.
Amazon.com (AMZN) Raised to Buy at BofA Merrill Lynch.
America Movil (AMX) Started as Outperform at Wells Fargo.
BJ’s Wholesale (BJ) Raised to Overweight at Barclays.
Continental (CAL) Raised to Buy at Argus.
Electronic Arts (ERTS) Raised to Outperform at FBR.
Fortune Brands (FO) Raised to Buy at Goldman Sachs.
FPIC Insurance (FPIC) Raised to Outperform at Oppenheimer.
Humana (HUM) STarted as Buy at Collins-Stewart.
Marriott Hotels (MAR) Started as Buy at Citigroup.
Starwood Hotels (HOT) Started as Buy at Citigroup.

You can join our open email distribution list which goes out several times per week for top analyst upgrades and downgrades, top day trader alerts, IPO’s, key secondary offerings, guru investor data on Buffett and others, mergers, and more.

JON C. OGG

Back September 2007, MetroPCS Communications, Inc. (NYSE: PCS) sent a letter to Leap Wireless management proposing a strategic merger that would have made it the fifth largest wireless carrier.  Based on how bad Leap’s figures were, it may be time for a revisit of what that merger might look like today.  After all, it was Leap’s turn in the barrel yesterday where its shares went roughly to $9.00 after being above $12.50 on Wednesday.

The prepaid wireless sector is very competitive.  For starters, AT&T (NYSE: T) has its GoPhone.  AMERICA MOVIL, S.A.B (NYSE: AMX) owns the TracFone.  T-Mobile is owned by Deutsche Telekom (NYSE: DT), and it offers T-Mobile To Go.  A further look at the numbers may show that the combination could be one of need rather than one of greed.

The terms of the proposed MetroPCS-Leap merger valued Leap at $69-ish to $77-ish at the time.  But it was a stock-for-stock  merger where each share of Leap common stock would be exchanged for 2.7500 shares of MetroPCS common stock.  Based upon a $8.75 MetroPCS price this morning, this would value Leap shares at $24.06. Leap’s new market cap is $1.27 billion after the drop and MetroPCS’s market cap is almost $3.1 billion.  With Leap’s stock closing at $22.59 yesterday, it would likely take a lot more than that.  Its 52-week trading range is $14.18 to $48.98.

Leap’s numbers fell short of estimates.  For the quarter, Leap’s loss was $62.8 million (-$0.89 EPS) if you include charges and expenses. Revenue  did rise by 26% to $597.4 million. Consensus estimates from Thomson Reuters were -$0.30 EPS and $636.1 million in revenue.  In the conference call after earnings, Leap’s management was candid about increased competition in the marketplace hurting its ARPUs. The reported ARPU was right at $40.73, under what many were targeting.  Price cuts and new launches may drive that down further and the company’s prior churn rate below 4.0% is noted as unsustainable and came in at 4.4% for this last quarter.

MetroPCS’s quarterly net income was down almost in half to $26 million, or $0.07 EPS on a 27% gain in revenues to $856 million.

Newer, or stronger, competition is coming from Boost, while Sprint and Virgin Mobile could have a large competitive advantage in the prepaid wireless sector.

This morning a research note from Auriga’s research said, “While the $69 per share buyout offer from MetroPCS from the summer of 2007 is now a distant memory, we believe that a deal would make sense now more than ever if for no other reason than that of expense control. A combined company would have to build only one upgraded network as the market transitions eventually to 4G. LEAP’s recent decision to raise funds suggests to us that no deal is in the works. However, we believe recent competitive changes in the marketplace could factor in any future decisions.”

Leap Wireless added more than 202,000 subscribers in the quarter to end with roughly 4.5 million subscribers.    MetroPCS added about 206,000 subscribers and ended with close to 6.3 million subscribers.  This would not be an overnight integration and would not come without cost and sacrifice.

It is hard to predict that a new offer will be brought back up just because both companies have been hit hard after earnings.  But this space is crowded and it is hard to imagine that the two independent players in the space can effectively compete against the giants in a price war.  Big telecoms will always win through time at that game.  Everything boils down to price.  If another offer was made in stock it would still allow shareholders to capture upside if and when the shares recover.

Leap and MetroPCS might want to reconsider a merger.  This could be need as the driving force rather than greed.

JON C. OGG
AUGUST 7, 2009

• Capital One (COF) Raised to Market Perform at FBR.
• Celgene (CELG) Started as Outperform at Oppenheimer.
• Gibralter Industries (ROCK) Raised to Neutral at Baird.
• Modine Manufacturing Co. (MOD)  Raised to Neutral at Baird.
• Smith & Nephew (SNN) Raised to Buy at Citigroup.
• AFLAC (AFL) Cut to Market Perform at FBR.
• America Movil SA (AMX) Cut to Neutral at JPMorgan.
• SPSS (SPSS) Cut to Neutral at Baird.
• Venoco, Inc. (VQ) Cut to Underweight at JPMorgan.
• WMS Industries Inc. (WMS) Cut to Neutral at JPMorgan.

JON C. OGG

• Petroleo Brasileiro (NYSE: PBR), or PetroBras, is Brazil’s integrated oil play that has quietly become one of the larger oil stocks with a $244 Billion market cap. At $111+, it spent much of this last week roughly 10% off of highs, and its 52-week trading range is $41.38 to $119.16.  This is also one of Ken Heebner’s long-term favorites in the sector.
• Companhia Vale do Rio Doce (NYSE: RIO) is a diversified metals and mining company that operates globally, and its market cap is $146.6 Billion as of now.  At $30.35, its is nestled between its 52-week trading range of $15.57 to $38.32. 
• Another of his picks for Brazil was actually the Mexico-based America Movil S.A.B. de C.V. (NYSE: AMX) as the wireless and fixed telecom play for all of Latin America.  This is a Carlos Slim entity, and its market cap is now $102 Billion.  This had roughly 150 million subscribers throughout Latin America.  Not bad for a company whose origins go all the way back to 2000, wait only 8-years?  On a split-adjusted basis this is still up 10-fold since coming public in February 2001.
• The last Cramer pick in Brazil was homebuilder Gafisa S.A. (NYSE: GFA).  At $30.85 this market cap is only about $4 Billion, small for picks this week, and shares are nestled in a $20.67 to $42.74 range of the last year.  This one has barely been public for a year, and we had previously noted how this was Sam Zell’s investment down in Brazil. Apparently Brazil’s housing market growth is not yet having the same issues of over-inflated prices with poor overextended borrowers like in the U.S.  Hopefully they know to look north and now see what problems to avoid.

Another recent Cramer pick on Latin America was the individual and corporate e-commerce platform provider MercadoLibre (NASDAQ: MELI), although this one was battered and deep fried in recent weeks and we recently questioned whether or not you should buy the stock since it tapped the secondary markets this soon.  It is based in Argentina, but also has ‘clientes’ in Brazil and elsewhere in Latin America.  In the past Cramer also noted GOL as the airline of choice for Brazil.

We know that Cramer would rather have a diversified portfolio of roughly five large stocks at any time rather than mutual funds, but there are many diversified ways to play the Brazilian stock market without having to choose one of the individual stocks.  If investors want to diversify via ETF’s, there is always the iShares MSCI Brazil Index (NYSE: EWZ).  It closed at $75.11 Friday and its 52-week trading range is $39.80 to $87.67.

A way to partially play Brazil with more diversification is also the SPDR S&P BRIC 40 (AMEX: BIK), although as a "BRIC" play you have to understand that this is more geographically diversified as Brazil, Russia, India, and China. The iShares also has a similar one called the iShares MSCI BRIC Index (NYSE: BKF), and Claymore has the Claymore/BNY BRIC (AMEX: EEB).

Jon C. Ogg
February 9, 2008

• Air Products (APD) & Praxair (PX) were both downgraded to Neutral at JPMorgan.
• Amecia Movil SA (AMX) started as Overweight at HSBC.
• Gol Intelligent Airlines (GOL) downgraded from Neutral at Sell at UBS.
• MasterCard (MA) raised to Outperform at Keefe Bruyette Woods.
• 3M (MMM) & United Technology (UTX) both started as Neutral at Banc of America.
• Medarex (MEDX) downgraded from Outperform to Peer Perform at Bear Stearns.
• Newmont Mining (NEM) downgraded from neutral to Underweight at HSBC.
• UBS (UBS) raised to Outperform at Bear Stearns.
• Vimpel Communications (VIP) downgraded from Peer Perform to Underperform at Bear Stearns.
• Wrigley (WWY) downgraded to Equal Weight from Overweight at Lehman Brothers.

See full notes on Starbucks downgrade at Goldman Sachs.

Jon C. Ogg
December 11, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.