Lee Cooperman’s Omega Advisors opens a new position in T-Mobile

Market Realist

Omega Advisors 4Q13 positions: A guide to Cooperman's investments (Part 4 of 8)

(Continued from Part 3)

Omega Advisors and T-Mobile

Omega Advisors Inc. is a New York–based investment advisory firm founded in 1991 by Leon G. Cooperman. The firm’s 4Q13 purchases include Gaming and Leisure Properties (GLPI), SunEdison Inc. (SUNE), T-Mobile US Inc. (TMUS), and Cameron International Corp. (CAM). Its sales include Polycom (PLCM) and Atmel Corp. (ATML).

Lee Cooperman’s Omega Advisors initiated a new 1.45% position in T-Mobile US Inc. (TMUS). In January, we reported in an article on our website that Third Point established a position in T-Mobile in anticipation of a potential merger of T-Mobile with Sprint Corp. (S) or Dish Network Corp. (DISH).

Cooperman seems to be following the trend of other other hedge funds such as Third Point and Paulson to capitalize on consolidation in the telecom space. According to reports, Sprint is seeking to buy rival T-Mobile, and a merger would create a large player that would compete against the two largest mobile operators, Verizon (VZ) and AT&T (T). However, regulatory concerns might impact the deal, as AT&T’s $39 billion deal to acquire competitor T-Mobile in 2011 was shot down by U.S. antitrust regulators. Japan’s Softbank Corp. owns a controlling stake in Sprint, while Deutsche Telekom AG owns about 67% of T-Mobile U.S.

An unconfirmed Wall Street Journal report said Sprint and Softbank are currently rethinking their options to buy T-Mobile from Deutsche Telekom (DTEGF) after Justice Department officials and FCC chairman Tom Wheeler expressed concerns that the merger might not secure the required approvals. News reports have speculated that the merger might face regulatory hurdles, especially since 600 MHz broadcast TV spectrum auctions are scheduled next year. Sprint owner Masayoshi Son of Softbank has been trying to convince U.S. regulators that merging the number-three and -four wireless carriers will increase competition and improve prices and options.

The number-four U.S. carrier said total revenue increased 39.1% year-over-year, to $6.83 billion in the fourth quarter. T-Mobile ended the fourth quarter of 2013 with approximately 46.7 million customers—an increase of 1.645 million total customers from the end of the third quarter of 2013. But net loss widened to $20 million, or $0.03 per share, from $8 million, or $0.01 per share, in the same quarter last year on higher expenses. The revenue was driven by the inclusion of MetroPCS results and higher equipment sales revenues on record smartphone sales.

T-Mobile’s network modernization program and the strong execution of its “Uncarrier” strategy contributed to a continued low branded postpaid churn rate of approximately 1.7% for the fourth quarter of 2013—flat versus the third quarter of 2013 and an improvement of approximately 80 basis points from 2.5% in the fourth quarter of 2012. Under the “Uncarrier” marketing strategy, T-Mobile introduced no-contract rate plans, offered free international data roaming, allowed customers to upgrade their devices earlier, and reimbursed new customers for the early termination fees for switching from another major U.S. operator.

The company expects higher capital spending for 2014.

Continue to Part 5

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