(Written by Alexander Crawford. Institutional data sourced from Fidelity, all other data sourced from Finviz.)
Last March, AT&T announced plans to acquire rival T-Mobile for a hefty sum of $39 billion. Now the Obama Administration is blocking the deal, arguing it would harm fair competition and American consumers. You can almost hear the collective sigh of relief from the other telecom companies.
The lawsuit filed by the Justice Department said that eliminating T-Mobile (which is currently the number 4 U.S. carrier, with AT&T at number 2 and Verizon Wireless as the leader, according to Reuters) would raise prices and be disastrous for the consumer, particularly because T-Mobile is known to offer low-cost service plans.
"Were the merger to proceed, there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions, including price, quality and innovation, would be diminished," said Deputy Attorney General James Cole.
AT&T CEO Randall Stephenson argued that the deal is necessary for AT&T to acquire more wireless airwaves amid growing demand. Now Stephenson plans to fight the government’s lawsuit, but the department said it remains open to negotiations with the company. Analysts say AT&T may have to make big concessions, such as selling major assets, to satisfy regulators.
"Ultimately, post concessions, we still expect the deal to be cleared -- eventually," said Liberium Capital analyst Mark James.
If the deal falls through, AT&T may have to pay around $6 billion to Deutsche Telekom in break-up fees and benefits.
AT&T was down almost 4% on the news, while Sprint Nextel (the third-largest U.S. carrier) surged almost 6%.
"It's mixed for Sprint. On the one hand, they were potentially going to lose T-Mobile USA as a competitor at the low end of the market," Pacific Crest Securities analyst Steve Clement said. "Now it's going to face a T-Mobile that's in a better position prior to the merger proposal, with extra cash and spectrum and a new roaming agreement with AT&T."
How do you think the other telecom companies will be affected by this news? We ran a screen on telecom and wireless companies that have seen significant institutional selling over the current quarter. Do you think investors will change their minds on these names after hearing the news?
Use this list as a starting-off point for your own analysis.
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List sorted by net institutional shares sold as a percent of share float.
1. Neutral Tandem, Inc. (TNDM): Provides voice, Internet protocol (IP) transit, and Ethernet telecommunications services worldwide. Market cap of $373.46M. Net institutional shares sold over the current quarter at 3.0M, which is 10.08% of the company's 29.77M share float. Might be undervalued at current levels, with a PEG ratio at 0.75, and P/FCF ratio at 10.31. The stock is a short squeeze candidate, with a short float at 5.93% (equivalent to 5.56 days of average volume). The stock has performed poorly over the last month, losing 20.68%.
2. InterDigital, Inc. (IDCC): Engages in the design and development of digital wireless technology solutions. Market cap of $3.20B. Net institutional shares sold over the current quarter at 2.0M, which is 4.45% of the company's 44.90M share float. The stock has had a good month, gaining 11.37%.
3. VimpelCom Ltd. (VIP): Operates as an integrated telecommunications services provider, offering voice and data services through a range of wireless, fixed, and broadband technologies. Market cap of $14.89B. Net institutional shares sold over the current quarter at 10.8M, which is 4.02% of the company's 268.62M share float. The stock has lost 22.93% over the last year.
4. USA Mobility, Inc. (USMO): Provides wireless communications solutions to the healthcare, government, enterprise, and emergency response sectors in the United States. Market cap of $335.26M. Net institutional shares sold over the current quarter at 801.5K, which is 4.02% of the company's 19.96M share float. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 6.59%, current ratio at 1.37, and quick ratio at 1.33. The stock is a short squeeze candidate, with a short float at 8.71% (equivalent to 8.46 days of average volume). The stock has gained 15.27% over the last year.
5. Leap Wireless International Inc. (LEAP): Provides digital wireless services under the “Cricket' brand name in the United States. Market cap of $711.45M. Net institutional shares sold over the current quarter at 2.1M, which is 3.90% of the company's 53.87M share float. The stock has performed poorly over the last month, losing 11.98%.
6. America Movil S.A.B. de C.V. (AMX): Provides wireless and fixed communications services in Latin America. Market cap of $99.41B. Net institutional shares sold over the current quarter at 83.4M, which is 3.50% of the company's 2.38B share float. The stock has had a couple of great days, gaining 6.59% over the last week.