Tag Archive: metropcs

Deutsche Telekom AG (DTE) has considered its T-Mobile USA division to merge with Metro PCS (PCS) Communications Inc. This action will leave Sprint Nextel Corp (S) trailing behind them. Once this negotiation pushes through, Deutsche Telekom AG (DTE) will gain a dominant share of 74%. Though there was a takeover plan made by Sprint, the tie-up between T-Mobile USA and Metro PCS will make them reconsider these plans.

Though Sprint was able to get a stock gain of109%in the stock market and has topped the MSCI World Telecommunication Services Index. It is still trading with 58% discount to its sales. But the only way it can compete with those larger companies is to buy Leap Wireless (LEAP) International Inc. or merge with T-Mobile or buy some shares with T-Mobile USA.

The board of both companies has approved the transaction with Metro PCS gaining scale of$1.5 billion in cash while the combined entity will remain under the T-Mobile name. T-Mobile USA being the 4th among the largest U.S. carrier seeks to stem losses and gain in order to compete in a market presently dominated by Verizon Wireless and AT&T. These wireless giants each have over 105 million subscribers as taken from June 30 results which is 3 times that of T-Mobile USA’s 33 million. Joining with Metro PCS will add 9 million prepaid customers to T-Mobile USA making them closer to Sprint’s No. 3 slot which has 56 million subscribers

Shares of Metro PCS rushed higher with 18% after 14 months the highest after Bloomberg increasing market value to around $5M. Sprint’s was affected slumping at its steepest level in a year.

The deal Metro PCS is having will cause Sprint to play on the defensive side forcing them to seek one deal with Leap to guard its spot in the telecommunications industry.

There is a rise in the shares of Leap at 17% being the biggest improvement in 4 years, but it only finished at 8.4%. Leap has 5.9Mprepaid subscribers as recorded in the end of the second the quarter and is the logical choice for Sprint.

Purchase of Spectrum

There is another alternative for Sprint and that is in place of buying it could acquire radio waves like the spectrum from entities like Dish and Verizon Wireless in order to widen its network of coverage which is an open to all process giving any prospective buyers the chance to participate.

Though the merger of T-Mobile USA and Sprint is not a distant possibility and even though T-Mobile USA continues with the deal with Metro PCS. Sprint cannot take the chance of having T-Mobile off the table for negotiations, what it does is only increases the pricing if they were to acquisition is to be pursued.

Complications on the Deals

A deal as complicated as this can go more complex if Sprint attempts to purchase the combined entity. It will take a year for the team up of Sprint to T-Mobile even with T-Mobile getting interest in such deal because T-Mobile is now a bigger entity to take for Sprint. Another alternative is or Sprint to make a rival proposal with Metro PCS. Sprint can wave the deal and improve its operation instead through a roll out of its present network and focus on getting a return in profit which could make the company increase its chance in competing. The investors of Sprint may as well continue running the business as successfully as they are doing and it is believed that Sprint considers this as their top priority move.

Failed Deals

There are many telecommunications deals that failed to reach completion. Take for example Sprint’s deal with Metro PCS this year which was rejected by the board. Cost of such move would have been in the level of $8 billion to include debts. There was also the discussion with Deutsche Telekom on the purchase of T-Mobile USA before March of 2011 announcement of AT&T offering to acquire the company for $39 billion. At a certain point due to the U.S. regulatory scrutiny which has forced AT&T to abandon its December offer for T-Mobile USA. Such deals with Metro PCS or Leap are not sufficient in making either T-Mobile USA or Sprint a threat on its rival which are already larger.

T-Mobile and Sprint are not as big as AT&T and Verizon so it is harder to compete. For them to increase their size by as much as 25% but if the rival is twice your size even an acquisition of 25% cannot close the gap to make it at par, rather it only reduces the gap.

 

Jobs Data sends stock market to finish lower

by Jeroen van Oostrom

Earlier today, the US Jobs Data was released for September 2011. We needed some good news after the terrible job report from August which didn’t create any jobs at all. For September, everyone expected around 50,000 jobs to be created. But the report was better than expected.

The report stated that 103,000 jobs were created in September. Sure you may think that it’s great, but a large portion of the number is Verizon workers going back to work in September after the strike that we saw over the summer. This is actually not great news. It’s decent news that we are actually creating jobs in the economy, but it’s no where close to getting us out of the high unemployment rate that we seem to be stuck on.

August 2011′s job data was also revised. The number went from 0 jobs created to 57,000 jobs created. Although that’s good news, it’s still no where close to getting us out of the 9.1% unemployment rate that we have been stuck on for months.

The Congressional Budget Office is predicting that the number will get better by the end of the Fourth Quarter of 2011. They are expecting it to drop to 8.9%. It’s not a huge drop but still, it’s below 9%, something we haven’t seen for a very long time.

This will be a big challenge for President Obama when it comes to his reelection. By the 2012 elections, the unemployment rate will still be very high, estimated to be around 8.5%. If President Obama is reelected, it will be pretty historical because it has never been done while the unemployment rate is so high. But we will have to see how things go. If things start turning around this quarter or the beginning of 2012, President Obama may have a good chance of being reelected. But it’s still to early to assume anything.

You would expect the stock market to do some rallying after the better than expected jobs data earlier today. But it wasn’t the case. The mixed jobs report actually sent the stocks finishing lower than yesterday. The economy in Italy and Spain were also downgraded today which added to the reasons for the drop today.

Today, the Dow Jones dropped 20 points, finishing at just over the 11,103 mark. The NASDAQ Composite lost over 27 points finishing at 2,479. The S&P 500 dropped just over 9.5 points, finishing at 1,155. And the NYSE dropped more than 71 points, finishing at 6,925.

Apple recently announced it’s iPhone 4s. But the death of Steve Jobs has left a small impact on the value of the Apple (AAPL) stock.  The value of Apple dropped just over 2% or $7.57 a share. it’s not a big drop and they will bounce back soon. Because of Steve Jobs, Apple is one of the strongest companies in the world and it won’t be going anywhere. It is the legacy Steve Jobs left behind and it will be around for a while. So right now, the 2% drop means nothing for its future.

Sprint (S) suffered a huge loss after announcing financial issues. They dropped nearly 20% today, or $0.60 per share. They finished at $2.41 a share.

Clearwire Corporation (CLWR) suffered a bigger loss when Sprint announced that they will no longer be selling phones that work on the Clearwire network. Their stocks dropped $0.66 per share, or 32%.  And MetroPCS Communications (PCS) also suffered a loss of 7.8% or $0.67 per share finishing at $7.93.

The telecommunication industry took a pretty big hit today. But this would also be a great opportunity for investors to jump in to buy these stocks at a low price. If that happens, it should send all three stocks back up. I believe that we need Sprint to stick around to be able to compete with the two big names of AT&T (T) and Verizon (VZ).

Today was the end of the first week of the last quarter. We are finally back over the 11,000 mark with the Dow thanks to three days of rallying. Although the jobs data today wasn’t great, it was still better than expected. I hope that things do turn out better in the near future. We already have Greece in trouble, hopefully Italy and Spain won’t go the same way.