JP Morgan sees U.S.
telecom sector consolidation, T-Mobile deal
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[January 23, 2017]
telecom sector could be on the brink of a major consolidation under
President Donald Trump's likely more merger-friendly administration,
said JP Morgan Securities, which now sees a 90 percent chance of
T-Mobile US being involved in a strategic transaction in the next five
T-Mobile could be involved in tie-up with Sprint Corp, or be acquired by
a cable company, JP Morgan said, adding that a transaction involving
Dish Network Corp or a sale to a foreign player that wants a foothold in
the U.S. wireless market is also likely.
Sprint dropped its bid to acquire smaller rival T-Mobile in August 2014
due to continued regulatory resistance. (http://reut.rs/2ffrEYW)
A potential combination of Sprint and T-Mobile is seen as the most
compelling, with the likelihood of a deal between the two wireless
carriers now at more than 35 percent, up from 10 percent in September,
with a 70 percent chance of approval, if announced, JP Morgan analyst
Philip Cusick said.
Japan's Softbank Group, which owns more than 80 percent in Sprint, had
pledged investment in the United States last year, reviving speculation
that Sprint and T-Mobile may rekindle merger talks.
JP Morgan upgraded Deutsche Telekom, which owns almost 65 percent in
T-Mobile, to "overweight" from "neutral" and raised its price target to
19.50 euros from 16.20 euros to reflect a 35 pct probability of a U.S.
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The logo of T-Mobile Austria is seen outside of one of its shops in
Vienna, Austria, February 25, 2016. REUTERS/Leonhard Foeger/File
Photo - RTSRJ3F
"We believe that parents Softbank and Deutsche Telekom have increased
their preference for a tie-up in the last six months and that the value
of about $5 billion of annual synergies is enough to smooth over most
disagreements on relative value," Cusick said.
Deutsche Telekom Chief Executive Tim Hoettges said in November that the
company was "not in the mood" to sell T-Mobile, although it was watching
for any change in the U.S. regulatory environment under Trump's
Cusick estimated a 20 percent chance of T-Mobile continuing to operate
as a standalone business in the next five years.
Shares of T-Mobile closed at $59.62 and Sprint at $8.93 on Friday.
Deutsche Telekom shares closed at 16.42 euros.
(Reporting by Derek Francis and Geetha Panchaksharam in Bengaluru;
Editing by Amrutha Gayathri)
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