Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD), did not just sit on its hands while AT&T tried to push through the T-Mobile deal. The company paid $3.6 billion for unused spectrum owned by SpectrumCo, a consortium of Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks.

Other potential AT&T acquisitions include MetroPCS Communications Inc. (NYSE: PCS), Leap Wireless International Inc. (NASDAQ: LEAP), and even Sprint Nextel Corp. (NYSE: S). But none would be as good as a deal for Dish.

AT&T’s main problem is that it would have to pay a premium price for Dish — perhaps as much as $50/share, or about 70% above today’s share price. That would value Dish at around $22 billion, a steep price given that AT&T just paid out $4 billion to T-Mobile in break-up fees. Even Ma Bell can’t afford to pay that kind of money too often for nothing in return, and it’s a sure bet that Dish would want a substantial break-up fee as part of any deal.

A report at Bloomberg News notes that Verizon Wireless owns 56 percent more 4G spectrum than AT&T in the top 10 markets and 46 percent more in the top 100. Verizon Wireless also claims 107.7 million subscribers compared with AT&T’s 100.7 million. Had AT&T been able to acquire T-Mobile, it would have increased its spectrum by 62%, leveling the playing field.

Dish recently acquired wireless spectrum from two bankrupt satellite television companies for about $2.8 billion in a deal that is still awaiting FCC approval. Verizon’s deal with SpectrumCo also needs regulatory approval, and so far there is no indication that either approval is in trouble.

But what does AT&T want with a satellite TV business? Of course it could hive it off once the deal is done, but it might make more sense to go after MetroPCS or Leap, both of which are simply wireless carriers. Or AT&T might be able to get Dish to sell just the spectrum. That would not be the best deal for Dish shareholders, but the company’s management would certainly be able to retire following such a transaction.

Dish shares are trading up more than 2% today at $29.34 in a 52-week range of $20.85-$32.56. Shares of AT&T are up almost 1% at $30.30 in a 52-week range of $27.20-$31.94.

One issue to consider… Dish would have every right in the world to demand another massive deal break-up fee in case the telecom giant could not convince regulators that this is good for consumers.

Paul Ausick

The US Federal Communications Commission is reviewing the purchase now, and the regulatory body is reportedly concerned about two major aspects of the deal: first, what happens to Verizon Wireless’s fibre-optic service, FiOS; and second, what effect will the cross-marketing agreements that were part of the deal have on competition?

Analysts at Goldman Sach have a suggestion, according to a report at Bloomberg News. Verizon should dump its wireline business and merge with Vodafone in the wireless business. A Goldman analyst claims, “[The] agreement on a frequency purchase and marketing cooperation that Verizon’s mobile-phone unit reached in December with U.S. cable operators led by Comcast would make separating [Verizon’s] divisions easier.” Vodafone shares jumped more than 2% in the UK on the news.

There are a couple of problems with Goldman’s analysis. First, the “separation” the firm is recommending is very likely the single thing that Verizon could do to assure that the FCC rejects the SpectrumCo deal. The only way the FCC would approve a “separation” is if Verizon found a buyer for its wireline business and the pension liabilities that would tag along.

That’s the second problem. Goldman’s analysts appear to think that there are potential buyers lined up for this. Verizon’s wireline business is likely to post revenues of more than $40 billion in 2011. A buyer would have to have pretty deep pockets. And then there’s this tidbit from Verizon’s third-quarter Form 10-Q:

Net cash provided by operating activities during the nine months ended September 30, 2011 decreased by $3.6 billion compared to the similar period in 2010 primarily due to inventory purchases for wireless devices and higher pension plan contributions.

The lion’s share of that $3.6 billion was certainly in pension plan contributions. What buyer is going to want to take over that part of the wireline business?

A cynic might say that Goldman’s analysis is not much more than beating the drum for some nice advisory, management, and underwriting fees should Verizon choose to follow this advice. A realist might say that Goldman’s proposal is a nominee for this year’s Mr. Dumas Award.

Paul Ausick

AGCO Corporation (NYSE: AGCO) Maintained Outperform as Bull of the Day at Zacks.
Apollo Group Inc. (NASDAQ: APOL) Reiterated Outperform and Raised Target to $60 at Credit Suisse.
Boston Scientific Corporation (NYSE: BSX) Maintained Hold but lowered estimates at Argus.
Career Education Corporation (NASDAQ: CECO) Cut to Hold at Argus.
Dendreon Corporation (NASDAQ: DNDN) Reiterated Neutral with $10 target at Baird.
FedEx Corporation (NYSE: FDX) Started as Outperform at Wells Fargo.
Goldman Sachs Group Inc. (NYSE: GS) Cut to Market Perform by Wells Fargo.
Huntsman Corporation (NYSE: HUN) named as Value Stock of the Day at Zacks.
Illinois Tool Works. Inc. (NYSE: ITW) Cut to Neutral at Credit Suisse.
Intel Corporation (NASDAQ: INTC) Cut to Neutral at Stern Agee.
Kohl’s Corporation (NYSE: KSS) Cut to Hold at Argus.
SanDisk Corporation (NASDAQ: SNDK) Raised to Buy at Stern Agee.
TD AMERITRADE Holding Corporation (NASDAQ: AMTD) Raised to Buy at Deutsche Bank.
The Travelers Companies, Inc. (NYSE: TRV) Raised to Outperform at Wells Fargo.
United Parcel Service, Inc. (NYSE: UPS) Started as Market Perform at Wells Fargo.
Urban Outfitters Inc. (NASDAQ: URBN) Started as Underperform and named as Bear of the Day at Zacks.
Vodafone Group PLC (NYSE: VOD) Raised to Buy at Goldman Sachs.
Zhongpin, Inc. (NASDAQ: HOGS) Started as outperform at Oppenheimer.

If you enjoyed this morning’s Wall Street research notes, you can sign up to receive these directly in your inbox each morning by joining our free email list in the box below.  We also include major movers, key stock calls, news on Warren Buffett and other gurus, as well as special exclusive feature stories.

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JON C. OGG

Sprint has just thrown all its cash behind the iPhone from Apple Inc. (NASDAQ: AAPL), and its current market cap of around $7 billion probably isn’t going to attract more than $30 billion in lending. Besides, Sprint was vocally opposed to the AT&T/T-Mobile deal and might be in line for some payback for the breakdown. But DT has other issues to solve.

First, of course, are shareholders’ expectations, which have been severely pulled in following the cancellation of the T-Mobile sale. According to a report at Bloomberg News, DT planned to use about $6.5 billion to repurchase shares and cut debt, both welcomed by shareholders. A bonus was the 8% stake that DT would acquire in AT&T. That’s all gone.

Worse, though, is that unless DT can come up with another deal, dividend payouts beyond 2012 are questionable. The company’s current dividend yield is 7.9%, but with other expenses facing DT some analysts question how long that payout can last.

The final drag on DT is Europe, where it conducts most of its business. European economies are struggling and so are European consumers. DT expects to return to growth in Europe by 2013, but that may be wishful thinking given the current state of affairs.

Paul Ausick

The US Department of Justice is investigating the spectrum deal to determine whether or not it is anti-competitive and could jeopardize competition in the telecommunications industry. AT&T Inc. (NYSE: T), Deutsche Telekom AG (OTC: DTEGY), and Sprint Nextel Corp. (NYSE: S) will be watching this very closely.

The Washington Post reports that the DoJ has confirmed the investigation, and an unidentified official has said that the department is most concerned about the cross-marketing aspects of the deal. In the press release announcing the deal, Verizon Wireless had this to say about the cross-marketing arrangement:

The companies also announced that they have entered into several agreements, providing for the sale of various products and services. Through these agreements, the cable companies, on the one hand, and Verizon Wireless, on the other, will become agents to sell one another’s products and, over time, the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis. Additionally, the cable companies and Verizon Wireless have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.

The DoJ does not want Verizon to give up on its fibre optic network, called FiOS, and focus entirely on the wireless market. The cross-marketing agreements also gives former competitors little reason to keep competing. Verizon gets to continue building out its 4G LTE network and to add value by getting access to Comcast and Time Warner content. The cable companies get to expand into wireless services without having to build a costly physical network. The spectrum licenses held by SpectrumCo were sold with the intention that they would spur competition, not kill it.

A month ago we could have said that it is unlikely that the DoJ will kill this deal. But now that the AT&T/T-Mobile USA merger is dead due to the mere threat of anti-trust litigation, it’s not out of the question that the DoJ will at least force some changes to the Verizon-SpectrumCo deal.

Paul Ausick

Barron’s listed  Berkshire Hathaway Inc. (NYSE: BRK-A), Comcast Corporation (NASDAQ: CMCSA), Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Metlife, Inc. (NYSE: MET), and Procter & Gamble (NYSE: PG).  The list also includes some ADRs via Seagate Technology PLC (NASDAQ: STX), Royal Dutch Shell (NYSE: RDS.A), Vodafone Group PLC (NYSE: VOD), Sanofi (NYSE: SNY), and Daimler (DDAIF).

The aim was companies with low P/E ratios, somewhat high dividends, and companies with an expected upside of potentially 15% to 20%.  This won’t excite many investors.  Apple Inc. (NASDAQ: AAPL) was not in the list nor was Google Inc. (NASDAQ: GOOG).  Neither pays a dividend, but both have relatively low P/E ratios considering the recent growth (14 for Apple and about 17 for Google).  If you use the Thomson Reuters consensus analyst price target, Apple has 29% upside and Google has 16% upside.

Berkshire Hathaway Inc. (NYSE: BRK-A) is interesting now that it has added International Business Machines Corporation (NYSE: IBM) and Intel Corporation (NASDAQ: INTC) to its portfolio.  IBM yields a low 1.5% today and is buying back stock despite trading at all-times highs.  The company’s goal is $20.00 in earnings per share by 2015.  Intel just warned about a large revenue shortfall but its dividend yield is now about 3.5%.

Comcast Corporation (NYSE: CMCSA) is actually still interesting because of its growth and value and because it is changing its mix to include content.  The 2% yield is one which has room for further dividend growth and the cable giant’s share price actually offers almost 30% to the Thomson Reuters consensus price target.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) and Seagate Technology PLC (NASDAQ: STX) are both very opportunistic calls.  Hard disk drive troubles around the globe, a prior discount to highs, and a dividend north of 4% helped Seagate.  Freeport-McMorRan is an opportunistic call now that global growth has brought down shares of metals companies drastically.  It has a 2.5% yield, which is not bad for a metals company, and at $39.00 the Thomson Reuters consensus price target is actually 30% higher than the current share price.

Perhaps the ADRs and European plays of Daimler (DDAIF), Royal Dutch Shell (NYSE: RDS.A), Sanofi (NYSE: SNY) and Vodafone Group PLC (NYSE: VOD) are opportunistic around the weakness of Europe today.  After all, if the Euro Zone continues its downward trajectory and with the Euro currency at an 11-month low it would seem that the article could blame a worsening effect if these positions do not work out.

24/7 Wall St. has recently announced a couple of key lists with predictions and expected upside.  Our DJIA Stocks Soon To Raise Dividends has already seen some come to fruition even sooner than expected, and we have released to our free email subscribers the 24/7 Wall St. 2012 Model Dividend Portfolio.

If you want to receive the full 24/7 Wall St. 2012 Model Dividend Portfolio you can sign up in the email submission below.  Each morning we send our free email list subscribers a snapshot of the key feature stories, the top daily analyst upgrades and downgrades, previews for key events, and many other aspects governing your finances.

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Barron’s noted a 6.9% drop so far in 2011 for its Favorite Stocks for 2011 versus a 1.9% drop in the S&P 500 Index.

JON C. OGG

The catch for Clearwire is whether or not it can survive missing a debt payment. The company is not likely to get more help from Sprint, which has problems of its own. Sprint would likely be happy to see Clearwire restructure, under bankruptcy protection or not. What Sprint can’t afford is for Clearwire’s network to shut down. As many as 8 million Sprint customers would lose service should that happen.

Clearwire needs help and it is turning up the heat on Sprint to provide that help. If Clearwire files for bankruptcy protection, the company’s spectrum licenses go to the bondholders, not to Sprint. That’s something Sprint will likely try to avoid at all reasonable cost. Trouble is, for Sprint, no new costs are reasonable.

Paul Ausick

Italy’s sovereign debt interest rates rise sharply. (Reuters)

Toyota’s (NYSE: TM) profits fall and it withdraws its full-year forecast. (Reuters)

Greece cannot decide on its new prime minister. (Reuters)

New Census Bureau data shows 49 million people in the U.S. live in poverty. (Reuters)

Barnes & Noble (NYSE: BKS) launches a new version of its NOOK e-reader. (Reuters)

Experts find a bug in Apple’s (NASDAQ: AAPL) app software. (Reuters)

Google’s (NASDAQ: GOOG) chairman says his company will not favor Motorola Mobility (NYSE: MMI) as its develops new software. (Reuters)

Societe Generale’s results hurt by Greece. (WSJ)

Dynegy’s (NYSE: DYN) holding company files for Chapter 11. (WSJ)

Johnson Associates says Wall St. bonuses will drop sharply this year. (WSJ)

Vodafone (NYSE: VOD) lifts its guidance. (WSJ)

The State Department may have improperly handled hearings on a pipeline to run from Canada to the U.S. (WSJ)

A drop in home prices may hurt the consumer economy in China. (WSJ)

Best Buy (NYSE: BBY) will move out of some international markets to focus on the U.S. (WSJ)

Dish Network (NASDAQ: DISH) may move into the internet TV market. (WSJ)

The SEC defends a $285 million settlement with Citigroup (NYSE: C) over fraud charges. (WSJ)

More people use the Walmart (NYSE: WMT) bank as traditional financial firms charge higher fees. (NYT)

The crisis in Europe prompts a tightening of bank lending in the U.S. (FT)

U.S. regulators increase their investigation of MF Global. (FT)

Banks begin to sell sovereign bonds that could make the eurozone crisis worse. (Bloomberg)

Douglas A. McIntyre

MetroPCS did not fare as well. The company reported EPS of $0.19 on revenue of $1.2 billion. Consensus estimates called for EPS of $0.23 and revenue of $1.22 billion. The company added 69,000 new customers in the quarter, a big drop from the 199,000 it added in the second quarter.

The challenge from Sprint Nextel Corp. (NYSE: S) and T-Mobile in the pre-paid market hurt MetroPCS’s revenues and earnings. This does not help the AT&T/T-Mobile plan to sell off some assets to other carriers as the two companies try to get their proposed merger through the regulatory process. MetroPCS was viewed as a possible buyer of those assets, but lower customer additions and lower profits are not usually conducive to expansion plans.

Sprint has no interest in buying any assets that AT&T/T-Mobile want to shed. The number three US carrier has fought the proposed merger every step of the way. Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone plc (NASDAQ: VOD), has had essentially no comment on the proposed merger, but certainly has little to gain from a tie-up between AT&T and T-Mobile.

The US Justice Department’s suit to stop the merger got a boost yesterday when a federal court prevented H&R Block, Inc. (NYSE: HRB) from buying low-cost tax preparer TaxAct, citing anti-trust violations. The deal was worth less than $300 million but the Justice Department argued that the merger would leave just two tax-prep firms, Block and Intuit Inc. (NASDAQ: INTU). Similarly, the AT&T deal would leave just one behemoth, AT&T, while Verizon Wireless would fall to a distant second place and be virtually forced to acquire Sprint in order to stay competitive.

The inability or unwillingness of another company to pick up AT&T/T-Mobile assets, coupled with the Block ruling, could be the beginning of the end for the proposed merger.

MetroPCS shares are down more than -7% this morning at $7.89, after posting a new 52-week low of $7.58. Leap Wireless is faring better, up more than 16%, at $8.09, in a 52-week range of $5.50-$17.66.

Paul Ausick

Aetna Inc. (NYSE: AET) Raised to Conviction Buy List at Goldman Sachs.
AMERIGROUP Corporation (NYSE: AGP) Raised to Buy at Goldman Sachs.
Eni SpA (NYSE: E) Raised to Buy at S&P.
JB Hunt Transport Services Inc. (NASDAQ: JBHT) Cut to Hold at Stifel Nicolaus.
Juniper Networks, Inc. (NYSE: JNPR) Raised to Outperform at RBC.
The Kroger Co. (NYSE: KR) Started as Neutral at JPMorgan.
News Corp. (NASDAQ: NWSA) Started as Neutral at UBS.
RPC, Inc. (NYSE: RES) Raised to Buy at Canaccord Genuity.
Safeway Inc. (NYSE: SWY) Started as Neutral at JPMorgan.
Salesforce.com (NYSE: CRM) Cut to Equal-weight at Global Equities Research.
SanDisk Corporation (NASDAQ: SNDK) Cut to Neutral at Stern Agee; named value stock of the day at Zacks.
Tanger Factory Outlet Centers Inc. (NYSE: SKT) Cut to Neutral at Credit Suisse.
TMS International Corp. (NYSE: TMS) Started as Outperform with $11 target at Credit Suisse.
Vodafone Group Plc (NYSE: VOD) Cut to Underperform as Bear of the Day at Zacks.
Watson Pharmaceuticals, Inc. (NYSE: WPI) named as Bull of the Day at Zacks.
Weyerhaeuser Co. (NYSE: WY) Raised to Hold at Deutsche Bank.
Whole Foods Market Inc. (NASDAQ: WFM) Started as Neutral at JPMorgan.

We also have some more data on analysts and the calendar.  Here are the top analyst upgrades and downgrades of the last week.  We also have the top twelve earnings reports and an economic calendar for what is coming down the pipe this week.

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JON C. OGG