Telecom & Wireless

Sprint/T-Mobile Merger Has Widespread Fallout in Sector

Some mergers take so long to occur that they end up being forgotten about. Others remain in the news all the way through the end. It appears that the odds of Sprint Corp. (NYSE: S) becoming part of T-Mobile US Inc. (NASDAQ: TMUS) just went from “more than questionable” to “through the roof” after a judge’s ruling went in favor of the companies. While there is still another ruling that has to go favorably in Washington, D.C., as well as one from the Public Utility Commission in California, a widespread move is taking place in many companies based on this merger.

Much of the media coverage is about the deal terms itself. Deutsche Telekom, T-Mobile’s parent, has indicated that it intends to try to complete the deal, and there is Softbank to consider, given its super-majority stake in Sprint. It also remains to be seen whether the companies will really try to renegotiate the old formal deal terms.

The movement is happening in shares of many rivals, partners and equipment suppliers.

Sprint stock was surging, with a gain of more than 70% to $8.25 Tuesday morning. T-Mobile stock closed down 1% at $84.53 on Monday but it was up almost 11% at $93.64. Its prior 52-week high was $85.79.

Next in line are the two wireless giants. AT&T Inc. (NYSE: T) was last seen trading up about 1% at $38.78, still down from a 52-week high of $39.70. Verizon Communications Inc. (NYSE: VZ) was down only fractionally at $59.88 early Tuesday, and that compares with a 52-week high of $62.22. While a stronger competitor might seem bad on the surface, the notion that there would just be three carriers combined instead of a four-way fight for ad-time and marketing costs would be a win for all three companies.

A lot is also going on now in the companies that own the towers and the infrastructure for wireless communications. American Tower Corp. (NYSE: AMT) shares traded up over 2% to $243.69 on Monday, and the stock was up 5% more at $257.62 on Tuesday. Crown Castle International Corp. (NYSE: CCI) closed up 1.6% at $152.92 on Monday, and it traded up 6% or so at $162.65 on Tuesday. SBA Communications Corp. (NASDAQ: SBAC) closed up 2.3% at $264.74 on Monday, but it was last seen up another 8% or so to $286.70.

Dish Network Corp. (NASDAQ: DISH) was up just 0.2% at $36.85 on Monday. It was up about 5% at $38.73 on Tuesday morning. Dish plans to use this merger to help launch its own mobile service, now that there will be fewer competitors. EchoStar Corp. (NASDAQ: SATS) was traded up nearly 5% at $39.98 on last look.

Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) and Nokia Corp. (NYSE: NOK) traded higher as well, now that the merger between T-Mobile and Sprint is more likely. Both companies have been under pressure over time as this extended merger situation was holding up 5G spending in North America. Ericsson was up over 5% at $9.16 Tuesday morning, in a 52-week range of $7.58 to $10.46. Nokia’s American depositary shares were almost 6% higher to $4.50, and its 52-week range of $3.33 to $6.42 should show how much pressure it has been under.

CommScope Holding Co. Inc. (NASDAQ: COMM), which now owns Arris and could be a 5G spending winner, saw its shares trade up by about 12% at $13.80 Tuesday morning. This stock had been disappointing for some time, which is more than evident when compared to a 52-week high of $27.00.

There was even a move in Cisco Systems Inc. (NASDAQ: CSCO) on hopes that this will clear the way for more 5G spending in North America. Its shares were up just over 1% at $49.60, which is down from a 52-week high of $58.26.

Investors need to know that this merger is not 100% complete. Some adverse parties to the deal remain, and further rulings could end up being unfavorable. That said, the verdict now is that this merger has a much stronger chance of happening over the coming months.