There’s a possibility that the T-Mobile (NYSE:TMUS) and Sprint (NYSE:S) merger deal closure could be delayed beyond May 2020. Currently, U.S. District Court Judge Timothy Kelly is investigating the merger deal under the Tunney Act.
Tunney Act review of T-Mobile and Sprint merger
The act requires an independent review of the Department of Justice’s remedy for any possible antitrust violations. Judge Kelly doesn’t have a formal deadline to complete the review. He was expected to make a decision by the end of 2019. However, he will likely support the merger deal. He was appointed by President Trump.
MoffettNathanson analyst Craig Moffett thinks that the T-Mobile and Sprint merger deal is more complicated now due to the coronavirus. According to a FierceWireless report, “That’s because Dish Network plays such a central role in the DOJ’s remedy…Dish Network isn’t looking so good these days. Dish’s shares have absolutely cratered in the coronavirus crisis,” said Moffett. The report also said, “Dish Network faces a near term debt maturity of $1.1B on May 1st, which comes on top of an additional $1.4B funding requirement for the purchase of Sprint’s pre-paid business…They said it’s important to note that Dish does have $2.4 billion on hand, and its satellite business is still free cash flow positive.”
The T-Mobile and Sprint merger deal also needs support from the CPUC (California Public Utilities Commission). The CPUC will likely vote on the matter next month. Meanwhile, the CPUC administrative judge proposed approving the merger deal.
Regulators approve T-Mobile and Sprint merger
Both the Department of Justice and the FCC approved the T-Mobile and Sprint merger deal in 2019. Antitrust regulators blessed the merger deal after T-Mobile and Sprint agreed to create the fourth-largest wireless carrier. The new T-Mobile agreed to sell Sprint’s prepaid business and a part of spectrum licenses to pay-TV operator Dish Network (NASDAQ:DISH). Dish would acquire the divested wireless assets for $5 billion. The pay-TV operator will likely deploy its own wireless network after the deal goes through.
More than a dozen state attorneys general sued to stop the T-Mobile and Sprint merger deal. However, they weren’t successful. The multistate lawsuit was led by New York and California on antitrust concerns. The states argued that the combination would reduce competition and harm wireless customers. However, a U.S. District Judge Victor Marrero allowed T-Mobile to acquire Sprint. California Attorney General Xavier Becerra and New York Attorney General Letitia James stated that they wouldn’t appeal the decision.
As of Tuesday, 23 analysts cover T-Mobile stock. Among the analysts, 19 or ~82.6% recommend a “buy,” and four or ~17.4% recommend a “hold.” None of the analysts have a “sell” recommendation on the stock. The average 12-month target price of $100 denotes a 27.1% potential upside in the stock. On Monday, Bank of America analyst David Barden resumed coverage on T-Mobile stock with a “buy” recommendation and a target price of $110. According to a report from TheFly, “The analyst says his assumed 8-times expected forwarded EBITDA premium relative to AT&T and Verizon is appropriate given the company’s potential to exceed those firms in growth due to potential synergy realization upside and network capability.”
AT&T (NYSE:T) and Sprint have average broker target prices of $38.54 and $7.28, respectively. The figures suggest returns of 37.2% and -9.2%, respectively, over the next 12 months.
On Tuesday, T-Mobile stock rose 3.9% and closed at $78.65 with a market capitalization of $67.4 billion. The stock was trading 22.4% below its 52-week high of $101.35 and 23.9% above its 52-week low of $63.50. T-Mobile stock has risen 0.3% YTD (year-to-date) as of Tuesday. In comparison, AT&T and Sprint have returned -28.1% and 53.9% YTD, respectively.
On Tuesday, T-Mobile stock was trading 6.4% below its 20-day moving average of $84.01. Meanwhile, the stock is trading 8.1% below its 50-day moving average of $85.62 and 4.0% below its 100-day moving average of $81.94. T-Mobile’s 14-day relative strength index score of 45.1 indicates that the stock isn’t “oversold” or “overbought.”
T-Mobile’s upper, middle, and lower Bollinger Bands are $97.51, $84.01, and $70.50, respectively. The stock closed near the middle Bollinger Band on Tuesday, which shows that it isn’t “oversold” or “overbought.”
On Tuesday, AT&T stock rose by 4.9% and closed at $28.09. Meanwhile, Sprint stock rose by 5.1% and closed at $8.02. The S&P 500 and the Dow Jones Industrial Average rose 9.4% and 11.4%, respectively.
In February 2020, T-Mobile and Sprint amended their merger deal terms. Read Will T-Mobile and Sprint Merger Close amid Virus Disruptions? and T-Mobile and Sprint Amend Merger Terms, Hurdles Remain to learn more. Read Will Data Breach Impact T-Mobile and Sprint Merger? for additional analysis.