Investors Cheer AT&T-T-Mobile USA Deal
AT&T buys T-Moble for 39 Billion. The investors may cheer, but will consumers be excited? What do you think of AT&T buying up T-Mobile and Alltel? Better service for consumers or more hoops and less options? Hard to tell now maybe but what are your predictions?
(Reuters) - Investors cheered AT&T Inc's deal to snap up Deutsche Telekom AG's T-Mobile USA in a $39 billion transaction that reshapes the U.S. wireless landscape.
The news of the deal, which sent shares of both companies higher in early trade, prompted at least four brokerages to upgrade the stock.
The deal, announced on Sunday, combines the second and fourth largest wireless operator, creating a new leader that will control 43 percent of the U.S. wireless market.
While there are regulatory risks and AT&T is seen paying heavily to land the deal, AT&T shares were up 2 percent in early trade.
Deutsche Telekom rose 13 percent to a record high.
Sprint Nextel Corp, which had held talks to combine with T-Mobile, stands to be the biggest loser in the transaction, as it would be left as the distant third in the U.S. market. Its shares were down 12 percent.
Shares of other wireless carriers, including MetroPCS Communications and Leap Wireless both soared over 8 percent on the hope that AT&T's deal would kick off another round of consolidation.
"This deal, if approved, allows Deutsche Telekom to exit the United States at a price much higher than we included in our sum of the parts valuation for the business as a standalone," said UBS analysts, who upgraded the stock to "neutral" from "sell."
The pricey purchase is likely to attract intense antitrust scrutiny over potentially higher customer bills.
Still, "given the solid valuation, and the fact that we thought T-Mobile USA would struggle to meet targets, selling is a good move," UBS said.
UniCredit and ESN/Equinet upgraded the stock to "buy" from "hold." HSBC raised its rating on shares of Deutsche Telekom and AT&T to "overweight.
Shares of Deutsche Telekom were trading at 10.80 euros in morning trade. AT&T shares traded at $28.49; and Sprint shares lost 71 cents, trading at $4.41 on the New York Stock Exchange.
(Reporting by Kenneth Li in New York and Isheeta Sanghi in Bangalore; Editing by Maju Samuel and Derek Caney)