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Billionaire Battleground: T-Mobile US Stock



TMUS EV to EBITDA (TTM) data by YCharts

Perhaps more important than its business is the possibility of an acquisition: T-Mobile has long been known as a potential takeover target. This isn't idle speculation -- T-Mobile's parent company, Deutsche Telekom , has made no secret about its desire to see the company sold. While T-Mobile is publicly traded, Deutsche Telekom still owns the vast majority of the company's shares, and has almost total control over its management and board of directors. The possibility that T-Mobile would be sold, and at a healthy premium, may have driven its performance in recent years.

In the past, many potential suitors have emerged for T-Mobile, but to date, no concrete acquisition plans have emerged. The possibility of a sale is further complicated by the current regulatory environment. Rival Sprint was poised to merge with T-Mobile back in 2014, but allegedly backed out after regulators showed signs of disapproval. In March, Reuters reported that Deutsche Telekom had shelved plans to acquire T-Mobile, and would wait for a more favorable political environment, which could come later this year depending on the outcome of the U.S. election.

That may have driven some of the selling in the first quarter. Paulson & Co. employs a variety of strategies, but is well-known for its merger arbitrage. Run by billionaire John Paulson, Paulson & Co. has purchased the shares of many companies that were ultimately acquired, such as DirecTV. T-Mobile remains a key holding of Paulson's (it amounted to just over 4% of his portfolio as of the end of March), but he trimmed his stake last quarter, dumping more than 5 million shares.

An unusual telecom stock

T-Mobile is a well-managed, growing company. It's adding customers each quarter, and they're of an increasingly high quality. But T-Mobile is expensive on a valuation basis, and ultimately, the performance of its core business may not matter -- at least not in the near-term. Its share price may be determined by its acquisition prospects more than its financials, at least for the foreseeable future.

That makes T-Mobile unique among telecom stocks. That additional risk and lack of dividend makes it unsuitable for anyone looking to add a standard telecom stock to their portfolio. However, for some investors, the potential upside may be attractive.

Something big just happened

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*"Look Who's on Top Now" appeared in The Wall Street Journal in Aug. 2013, which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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