AT&T deal roils telecom stocks

Sprint's stock sinks after AT&T says it will acquire T-Mobile. Shares of Leap, MetroPCS and US Cellular rise. Plus, video analysis of the deal's regulatory hurdles.

By TheStreet Staff Mar 21, 2011 10:59AM

TheStreetBy Scott Moritz, TheStreet

 

AT&T's (T) plan to buy Deutsche Telekom's (DT)T-Mobile, the fourth-largest telecommunications company, would create the nation's biggest phone service provider and leave a pile of winners and losers in its wake.

 

While the $39 billion cash-and-stock deal, if approved after a long review, won't close for another year, investors are staking their positions now. And early moves indicate that Wall Street is gearing up for deal time in telecom.

 

Post continues after video:

 

The biggest loser is Sprint Nextel (S). The stock was falling more than 12% Monday. Sprint failed as a bidder for T-Mobile and now faces the daunting challenge of being a distant No. 3 player in the wireless market.

 

Unfortunately, the only potential buyer for Sprint is Verizon (VZ), and the prospect of the No. 1 player combining with No. 3 is highly unlikely. That leaves Sprint with the option of going it alone or pursuing expensive takeover deals with smaller players.

Among Monday's winners was Leap Wireless International (LEAP). Shares of the San Diego regional cellular shop jumped more than 12%. Leap is one of three small wireless operators that would be on the takeout menu for Sprint or Verizon, should the bulking up trend take off.

 

Another winner is MetroPCS (PCS). Shares of the Richardson, Texas, mobile company surged 5.3% as its name moved up to the top of the telecom shopping list.

 

U.S. Cellular (USM), the No. 6 wireless carrier, is also getting a boost. Its network uses wireless technology compatible with that of Sprint and Verizon. U.S. Cellular shares were up 4.9%.

 

Sprint's on-again, off-again broadband partner Clearwire (CLWR) was among the struggling stocks. Its shares were slumping 2.6%.

AT&T may turn out to be the biggest winner. In different times, pricey acquisitions have been viewed as dilutive and risky, but investors seem to be cheering the moxie of a big wireless land grab. AT&T shares were up 1.9% Monday morning.

 

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