U.S. Markets closed

Which Telecom and Wireless Companies Can (and Cannot) Still Be Acquired?

Jon C. Ogg

What generally happens when industries have only regional providers or merely a whole slew of competitors? Usually it boils down to mergers for size and scale, then outright acquisitions to eliminate competition. We have seen this consolidation in the wireless space with AT&T Inc. (NYSE:T), Verizon Communications Inc. (VZ), Sprint Corp. (NYSE: S) and T-Mobile US Inc. (TMUS).

Fitch Ratings recently showed that the four largest U.S. wireless carriers have some 92% of the U.S. market share. The long and short of the matter is that M&A in the U.S. wireless space has seen its heyday. 24/7 Wall St. has compiled a full-spectrum analysis of which wireless and telecom carriers and providers can still be acquired and which ones simply cannot.

Ten Common and Deadly Mistakes That Wreck Investment Plans

The good news for investors hoping for M&A is that some players do still exist. The bad news is that these players now all will be considered weaker competitors on their own, meaning that investors have to be very careful if they want to buy a company based only on its own merits and opportunity.

We agree with Fitch Ratings in its belief that few material targets remain when operators and spectrum holdings are considered. We also operate under the same belief as Fitch that the Federal Communications Commission (FCC) would restrict any further material consolidation among the top wireless carriers. So the real question, and opportunity, outside of the wireless carriers is where else to look for M&A.

One such move that Fitch expects in the near term would be that Dish Network Corp. (DISH) will make a wireless strategy move within the next few months, and according to outsiders it would likely be in some form with T-Mobile US Inc. (TMUS). Fitch said, "Activity around DISH could be the most significant near-term wireless industry consolidation event."

The Seven Best Paying Jobs With Only High School Diploma

Elsewhere, Fitch believes that the 578 to 698 MHz TV spectrum auction could occur around 2015 or 2016, and that auction alone could represent the largest single acquisition event for the industry over the foreseeable future. Unfortunately, that leaves no room for investors because you cannot invest in the government nor in the FCC. Another hopeful from Fitch is some or all the LightSquared L-band spectrum.

So, what other mergers are there in the near term or long term? We would point out that AT&T Inc. (NYSE:T) was blocked in its acquisition of T-Mobile US Inc. (TMUS).

The Verizon Communications Inc. (VZ) deal with Vodafone Group PLC (VOD) is the largest deal and has been years in the making. Now Verizon gets to own effectively all of Verizon Wireless. One fear of 24/7 Wall St. is that Verizon may have to work on its leverage now rather than continue to pursue annual dividend hikes.

The end of M&A may take away oomph for the quick in and out traders and may limit special situation investing. The good news is that this could be the best thing in the world for dividend-hungry investors. Fitch was specific to say that the end of the M&A cycle will bring steadier financial trends and called it a consolidated and maturing marketplace.

24/7 Wall St. has gone back over the telecom and wireless operators that are left. There are still some potential acquisition candidates, but our focus revolves around who can close a regional dominance gap or who can bring other spectrum assets or other lesser-known assets to the table. Here are some of the possibilities after some freshly closed and pending transactions.

Atlantic Tele-Network Inc. (ATNI) offers wireless and wireline telecom services in North America, Bermuda and the Caribbean. Its ALLTEL spectrum and customers are under an acquisition of AT&T right now and after the FCC forced Verizon to sell coverage areas in Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. The company's current market value is a mere $760 million.

Leap Wireless International Inc. (LEAP) is being taken into the AT&T empire as well. MetroPCS Communications also was acquired by T-Mobile. Virgin Mobile was acquired by Sprint, long before Softbank gobbled up Sprint Nextel and Clearwire.

America's Disappearing Jobs

United States Cellular Corp. (USM), which is effectively under Telephone & Data Systems Inc. (TDS), has been a name up for grabs before. Sprint Corp. (NYSE: S) is closing down its acquired portion of the U.S. Cellular network by the end of October. U.S. Cellular has been speculated as a buyout name in the past, and perhaps it could be again with a $3.65 billion market value. TDS has a market value of $3 billion. How a merger would work here is likely a two-step process, as U.S. Cellular is a majority-owned subsidiary of TDS.

Cincinnati Bell Inc. (CBB) is one that we have considered a possible target for years, but now that may be complicated with its recent data center spin-off of Cyrusone Inc. (CONE). The market value for Cincinnati Bell is only $612 million. Its Wireless segment is only a part of the company and is a licensed service territory serving Greater Cincinnati and Dayton, Ohio, and areas in northern Kentucky and southeastern Indiana.

Shenandoah Telecommunications Co. (SHEN) is also a broader telecom outfit with a small footprint. Its total market value is only $418 million, and its wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona in Pennsylvania to Harrisonburg in Virginia. At the end of 2012, it owned some 150 cell site towers and had 216 leases with wireless communications providers.

There are two regional players specific to Alaska: General Communication Inc. (GNCMA), worth some $369 million, and Alaska Communications Systems Group Inc. (ALSK), worth a mere $127 million. Is a deal possible in Alaska, or does anyone want to bother? If so, the dealmakers might want to consider closing on it during the summer when it is not so cold and when they have almost endless daylight to work on it.

Would any acquirer want to go after CenturyLink Inc. (CTL) or Windstream Corp. (WIN) for their multitude of telecom and communications assets? We doubt it, based on things the way they are today, but by now everyone knows that any company could be a player or a target. CenturyLink is worth almost $20 billion, while Windstream is worth almost $5 billion.

Two names that have dropped off the M&A radar and possible rumor mills are Vonage Holdings Corp. (VG), valued at $665 million, and magicJack VocalTec Ltd. (CALL), valued at $250 million. These are VoIP telecom players rather than wireless targets, but a telecom acquirer could suddenly take in millions of fixed-line accounts here. You know the bulk of each's customer base also owns cellphones. magicJack most recently had an estimated 3.36 million active MJ subscribers and about 4.37 million app users, while Vonage recently claimed about 2.3 million subscribers.

Hawaiian Telcom Holdco Inc. (HCOM) is worth a mere $263 million, but wireless is a tiny portion of its business and this may fall under the same sort of local risks for a possible buyer that the Alaskan companies are in as well. The footprint may simply be too small to matter, and state laws and taxation are possible risks. This company is actually now in the midst of making a small data center acquisition of its own.

BlackBerry Ltd. (BBRY) cannot be left out, even if it is a handset maker and patent owner rather than a carrier. The company is under strategic review right now, and frankly it has to hope for a buyout because it is simply too problematic to recapture its former glory for its current management team. BlackBerry's market cap is still less than $6 billion, now that its stock is down so much from its highs.

We want to conclude with one last possibility in wireless consolidation. The ownership of cellular towers is an industry that has consolidated but still could consolidate further. One name that used to be a potential acquisition was SBA Communications Corp. (SBAC), even though it actually recently made an acquisition of its own. Its market cap is now $9.6 billion, yet the company keeps having normalized losses and is expected to have losses this year and next year, according to the 16 or so analysts that follow the company.

Controlling the cell towers is a big business because communities would rather not have more and more towers, and most buildings and high points that cellular towers need are already occupied. American Tower Corp. (AMT) has converted to a real estate investment trust (REIT) and is worth $27 billion, even as shares are close to a 52-week low and down almost 20% from a high. Crown Castle International Corp. (CCI) is worth $20 billion, and while not close to a 52-week low the stock is down some 15% from its high.

So, this proprietary report on "who is left to acquire in telecom and wireless" is something we have considered for quite some time. All you have to do is to consider just how many telecom and wireless mergers have taken place. Our guess is that you could ask a deal counter or someone who has had to rubber stamp mergers at the FCC and Department of Justice and they would merely say "too many to count." Here are just some of the many telecom and wireless companies that have been acquired: Nextel, ALLTEL, Arch Wireless, Cingular, Qwest, Pac Bell, VoiceStream and on and on.

When Fitch made its predictions and observations, most of which we agree with, it said:

The long-term future for regional or small wireless operators is uncertain at best ... these operators will continue to face difficulty in remaining competitive with the large nationwide operators. Fitch believes that these operators will eventually be acquired by larger wireless operators. Regardless of the time horizon considered, the consolidation of the wireless industry is nearing an end and future competitive positioning will rely on operating strategies rather than on mergers and acquisitions.

We have seen some speculation that ultimately a deal could be done in some form between Sprint and T-Mobile, but Fitch effectively has nixed that. If there is one last merger to be done on the larger scale, that likely is it. We simply expect great regulatory fears, and these companies already have had enough network and spectrum integration issues that they may just choose to fight it out for which carrier will jockey for the number three and number four position years into the future.

What Not To Do If You Win The Lottery

Now that the buyout potentials are done, and if AT&T or Verizon are now done in the major M&A game, then the end result is that the post-consolidation phase of wireless and telecom almost certainly leaves more safety of dividends ahead. The telecom and dividend royalty members are AT&T Inc. (NYSE:T) and Verizon Communications Inc. (VZ). AT&T is king of the dividend dance with a 5.3% dividend yield, and Verizon is somewhat further behind as a second prince with a 4.3% yield.

The telecom and wireless landscape already consolidated massively. There are still some deals to be done on the carrier side, but the reality is that the size of today's remaining companies simply means that the great mergers likely have already been seen. The finishing note may simply be that dividends from the "solid" telecom and wireless players appear to be ever safer ahead.

Related Articles

  • Nathan Chen Just Stunned Every Figure Skater You've Ever Heard Of
    Sports
    Time

    Nathan Chen Just Stunned Every Figure Skater You've Ever Heard Of

    U.S. figure skater Nathan Chen set an Olympic record with six quad jumps in the men’s figure skating long program on Friday. Chen bounced back after a disappointing turn during the short program that left the skater in 17th place in the 2018 Winter

  • Delta Air Lines Wants the Boeing "797" ASAP: Here's Why
    Business
    Motley Fool

    Delta Air Lines Wants the Boeing "797" ASAP: Here's Why

    Last year, Boeing (NYSE: BA) strained its relationship with U.S. airline giant Delta Air Lines (NYSE: DAL) by attempting to have big tariffs imposed on Delta's purchase of CSeries jets from Bombardier. Many pundits saw Boeing's trade complaint as a risky move that could alienate a key customer -- especially after Delta ordered the Airbus (NASDAQOTH: EADSY) A321neo last December instead of Boeing's 737 MAX 10. Delta isn't going to make bad business decisions just to punish Boeing.

  • How effective was the Russian social media campaign? Here's a clue
    Politics
    Quartz

    How effective was the Russian social media campaign? Here's a clue

    One of the overarching questions about Russia’s online campaign to destabilize the US election is just how effective those social media efforts really were. Well, according to special counsel Robert Mueller’s indictment (pdf) of 13 Russian citizens and three entities, Russian trolls were persuasive enough to get at least one US citizen to stand up and wish their boss a very special happy birthday. The indictment says they used a social media account to arrange “for a real US person to stand in front of the White House…under false pretenses to hold a sign that read ‘Happy 55th Birthday Dear Boss.'” They reportedly told the American that it was for someone who “is a leader here and our boss…our

  • Lisa Marie Presley Says She's Over $16 Million in Debt, Divorce Documents Claim
    Business
    People

    Lisa Marie Presley Says She's Over $16 Million in Debt, Divorce Documents Claim

    According to the documents, which were filed on Wednesday and obtained by PEOPLE Friday, Justin Stiegemeyer, Presley’s current business manager who is responsible for “day-to-day finances and paying all of her bills,” disclosed that the 50-year-old had first learned of her debt while her old business manager Provident Financial Management was handling her finances. In the court documents, Stiegemeyer went on to claim that Presley owes almost $50K in credit card debt, although he added that she has been actively paying down the sum and has managed to pay off the debt on certain cards in full.

  • Germany's Figure Skater Just Went Full Game of Thrones. The Internet Can't Even Deal
    Entertainment
    Time

    Germany's Figure Skater Just Went Full Game of Thrones. The Internet Can't Even Deal

    Winter has officially come for the 2018 Olympics in PyeongChang, and it is epic. Germany’s figure skater Paul Fentz came blazing onto the ice suited up for battle as thunderous music from Game of Thrones played, thrilling the internet to no end.

  • This Is Warren Buffett’s Top Equity Holding, Surpassing Wells Fargo
    Business
    Fortune

    This Is Warren Buffett’s Top Equity Holding, Surpassing Wells Fargo

    Warren Buffett's Inc. has taken a real shine to Inc. Berkshire boosted its holding of the iPhone maker to $28 billion at year-end, surpassing its stake in & Co., which was worth $27.8 billion on Dec. 31. Apple has continued to rally this year, increasing the value of Berkshire's stake to $28.6 billion based on Thursday's closing price.

  • Washington, D.C., Has Given the Boring Company a Permit for a Possible Hyperloop Station
    Finance
    Fortune

    Washington, D.C., Has Given the Boring Company a Permit for a Possible Hyperloop Station

    Washington, D.C., has issued a permit allowing Elon Musk's Boring Company to do preparatory and excavation work in what is now a parking lot north of the National Mall. The permit, reported Friday by the Washington Post, was issued way back on November 29th of 2017. The permit is part of an exploratory push by the city's Department of Transportation, which according to a spokesperson is examining the feasibility of digging a Hyperloop network under the city.

  • Gilead wins reversal of $2.54 billion hepatitis C drug patent verdict
    Business
    Reuters

    Gilead wins reversal of $2.54 billion hepatitis C drug patent verdict

    A federal judge in Delaware has overturned a jury's verdict requiring Gilead Sciences Inc to pay a record $2.54 billion because its hepatitis C drugs Sovaldi and Harvoni infringed a patent held by rival Merck & Co Inc. The verdict had been the largest ever in a U.S. patent case but U.S. District Judge Leonard Stark in Wilmington, Delaware, on Friday ruled Merck's patent was invalid. Gilead in a statement on Saturday said it always believed the patent was invalid and was pleased the judge confirmed that opinion. The December 2016 verdict followed a trial in which jurors found that Merck's patent on hepatitis C treatments, which it acquired in 2014 when it bought Idenix Pharmaceuticals, was valid.

  • California law could allow illegal immigrants to vote
    U.S.
    Fox Business Videos

    California law could allow illegal immigrants to vote

    California Lt. Governor candidate Lydia Ortega (R) reacts to the state’s push to give illegal immigrants the right to vote once they get a driver’s license.

  • Dog Food Brands Recalled Over Concerns About Euthanasia Drug
    Business
    Fortune

    Dog Food Brands Recalled Over Concerns About Euthanasia Drug

    J.M. Smucker Co. is recalling several shipments of dog food after an independent investigation found traces of pentobarbital, a euthanasia drug, in samples from a range of popular brands. The company announced on Thursday that it would withdraw shipments

  • Why Starbucks Shareholders Have Nothing to Worry About
    Business
    Motley Fool

    Why Starbucks Shareholders Have Nothing to Worry About

    Starbucks (NASDAQ: SBUX) shares fell a bit after the company reported its first-quarter earnings. In fact, a recent report from BMO Capital Markets found that the average Starbucks location has 3.6 other Starbucks cafes within a one-mile radius. Starbucks plans to do that as it rolls out its premium brand.

  • Who Is Richard Pinedo, Who Pleaded Guilty in Mueller's Trump-Russia Probe?
    News
    Newsweek

    Who Is Richard Pinedo, Who Pleaded Guilty in Mueller's Trump-Russia Probe?

    Richard Pinedo, of Santa Paula, ran an online service called Auction Essistance, through which he bought and sold bank account numbers that would help users circumvent security measures of digital payment companies. Pinedo transferred, possessed and used the identities of other people in connection with unlawful activity, according to a statement of the offense. It said he has no criminal history and that he agrees to cooperate with Mueller's office.

  • 3 Tech Stocks With Fresh, Double-Digit Dividend Increases
    Business
    Motley Fool

    3 Tech Stocks With Fresh, Double-Digit Dividend Increases

    With earnings season well under way, lots of companies are announcing dividend increases. If you're looking for companies with strong dividend growth, here are three tech stocks to consider. Intel, Cisco, and Corning all announced double-digit increases

  • Mueller Deflates President Trump's Claim That Russia Meddling Was Hoax
    Politics
    Fortune

    Mueller Deflates President Trump's Claim That Russia Meddling Was Hoax

    Donald Trump has insisted for more than a year that Russians didn’t try to get him elected. Special Counsel Robert Mueller put an end to those claims on Friday, declaring definitively that they did. A federal grand jury indicted 13 Russian nationals and a so-called “troll farm” in St. Petersburg on Friday for a broad campaign to sway the 2016 election in Trump’s favor.

  • We May Finally Be Turning the Corner on the Flu Epidemic
    Health
    Fortune

    We May Finally Be Turning the Corner on the Flu Epidemic

    The influenza outbreak that’s killed thousands of Americans and wreaked havoc on the lives of many more seems to have passed its peak and started a slow retreat. While it’s a good sign that flu activity is starting to level off, it’s a far cry from the precipitous drop in doctor visits typically seen when a busy season starts to come to a close. The CDC’s national map of influenza activity offers some hope.

  • Buy These China Internet Stocks on Chinese New Year
    Business
    Zacks

    Buy These China Internet Stocks on Chinese New Year

    Friday, Feb. 16 marks the first day of the annual Chinese New Year celebrations, initiating the year of the dog and kicking off a 15-day holiday that will be honored by billions of people around the world. Chinese New Year is one of the most prominent festivals in the world, and it typically witnesses the largest annual mass migrations of people on earth.

  • Wynn Resorts says ex-CEO Steve Wynn not entitled to severance pay
    Finance
    Reuters

    Wynn Resorts says ex-CEO Steve Wynn not entitled to severance pay

    Wynn, who denied the accusations, remains Wynn Resorts' largest shareholder and owns about 12 percent of the company. Casino mogul Wynn's current healthcare coverage would be terminated at the end of this year, the casino company said in a regulatory filing, adding that his personal residence's lease at Wynn Las Vegas will terminate by June this year. Last week, Wynn Resorts gave the top job to company veteran Matt Maddox.

  • FBI needs to be shut down: Chris Farrell
    Politics
    Fox Business Videos

    FBI needs to be shut down: Chris Farrell

    Judicial Watch Director of Investigations Chris Farrell on the problems with the FBI and why the FBI needs to be shut down.

  • Why Americans Started Buying Military-Style Weapons Like the One Used in the Florida Shooting
    News
    Time

    Why Americans Started Buying Military-Style Weapons Like the One Used in the Florida Shooting

    The shooting at Marjory Stoneman Douglas High School in Parkland, Fla., bore many of the hallmarks of the other school shootings that have shocked the nation over the course of the last weeks, months and years. Among those similarities was the weapon used by accused shooter Nikolas Cruz: the AR-15. This semiautomatic version of the U.S. military’s M-16 infantry rifle and similar weapons have been used in most of the deadliest mass shootings in the last decade, including the one at Sandy Hook Elementary School. In some states like Florida, they’re easier to buy than a handgun.

  • Walmart looks to make major deal, Amazon partners with Bank of America, Caterpillar says everything is okay
    Business
    Yahoo Finance

    Walmart looks to make major deal, Amazon partners with Bank of America, Caterpillar says everything is okay

    Walmart (WMT) is looking to purchase more than 40% of Amazon’s India rival Flipkart, according to Reuters. The deal would give Walmart some much needed muscle in India, where Amazon is already investing $5B into ventures like online grocery delivery. Amazon (AMZN) is partnering up with Bank of America (BAC) for business lending.

  • 3 Hated Dividend Stocks to Buy Now
    Business
    Motley Fool

    3 Hated Dividend Stocks to Buy Now

    Investors seem to despise pipeline giants Kinder Morgan (NYSE: KMI), Enbridge (NYSE: ENB), and Plains All American Pipeline (NYSE: PAA) these days given that all three are down more than 20% over the past year. Enbridge's stock has lost about 20% of its value over the past year.

  • The Internet Is Head Over Heels for the Yuzuru Hanyu and Javier Fernández Figure Skating Bromance
    Celebrity
    Time

    The Internet Is Head Over Heels for the Yuzuru Hanyu and Javier Fernández Figure Skating Bromance

    Japanese figure skater and Winnie the Pooh enthusiast Yuzuru Hanyu not only won the men’s short program at the 2018 Winter Olympics on Thursday, but thanks to his bromance with Spain’s Javier Fernández, won the Internet’s heart as well. Hanyu and Fernández have been competing against each other for years, but off the ice, their friendship appears to have only grown stronger. “With ‘Yuzu,’ we are everything, we are friends, we are teammates, at some point we have to be rivals,” Fernández told Reuters in 2015.

  • February Top Industrial Dividend Stock
    Business
    Simply Wall St.

    February Top Industrial Dividend Stock

    Industrial names generally suffer from deep cyclicality which can affect companies operating in areas ranging from machinery to aerospace to construction. As such, the position a company has relative to the economic cycle drives its level of profitability

  • Applied Materials, Inc. Stock Is a Screaming Buy Right Now!
    Business
    InvestorPlace

    Applied Materials, Inc. Stock Is a Screaming Buy Right Now!

    On Wednesday after the close, Applied Materials, Inc. (NASDAQ:AMAT) reported earnings. Despite a plethora of good news, AMAT stock actually sold off in early Thursday trading. Fiscal first-quarter earnings per share of $1.06 came in 8 cents per share ahead of expectations.

  • The Russia Investigation Is Moving Really Freaking Fast
    News
    FiveThirtyEight

    The Russia Investigation Is Moving Really Freaking Fast

    Feb. 16, 2018 at 4:26 PM The investigation by special counsel Robert Mueller into Russian interference in the 2016 election took a significant step forward Friday, with the indictment of 13 Russian nationals and and three Russian organizations along with the announcement of a guilty plea from a California man for identity fraud. The indictment and guilty plea are important because they are the first charges related to Russian attempts to sabotage the election. (The other indictment and pleas in the Mueller investigation have been in relation to other criminal activities.) The election interference is an activity long denounced by the U.S. intelligence community but routinely called into question