UPDATE: Macquarie Sees 70% Probability Sprint And T-Mobile Deal Will Go Through

Benzinga

Shares of Sprint (NYSE: S) were up almost two percent in Tuesday’s pre-market after Macquarie upgraded the stock to Outperform from Neutral and put a $10.18 price target on the stock.

A key point for analyt Kevin Smithen’s upgrade is the likelihood that the Department of Justice and FCC will approve Sprint’s deal with T-Mobile.

The report states, “We now think the chances of regulatory approval are ~70% based on our analysis of the DOJ complaint against AT&T, and the emergence of Comcast (WiFi) as a provider of mobile wireless telecom services, as defined by the DOJ, which sharply reduces HHI and mkt. concentration concerns in top CMAs.”

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The research report also lays out seven myths regarding the deal. These include: less competitiveness in urban markets, Sprint and T-Mobile are competing effectively in suburbs versus Verizon and AT&T and that Sprint and T-Mobile can afford to bid in the incentive auction.

Smithen’s bullishness is more clearly explained with the risk/reward scenario: “With 53% upside to $13.20 by end-’15 if a deal is approved vs. 17% downside to $7.25 if rejected, S shares are now the best risk/reward in US telecom.”

The raise in price target from $9.75 to $10.18 is the result of a DCF.

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