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March 22, 2011 – Comments (10) | RELATED TICKERS: T

I knew it made sense for AT&T to go after T-Mobile. After all, they use the same technology, so integrating the networks should be possible (believe me, they will come up with a way to mess this up). And more importantly, they have excellent business reasons for doing so.

But if you decide to make an acquisition, shouldn't you be at least a bit worried about the price you pay? I don't expect a company like AT&T to behave like Warren Buffett when buying companies. But from what I read here,  isn't it clear they are overpaying? Or am I missing something here?

I have no positions in AT&T, but if I were long, I'd sell today.

10 Comments – Post Your Own

#1) On March 22, 2011 at 11:54 AM, Momentum21 (96.85) wrote:

I can't add any value to what the financial implications would be should they have picked it up cheaper. The real impact will be how they take advantage of the economies of scale, cut costs and integrate the business regardless of the price paid. 

There is also the opportunity cost of not making the acquisition. How else are they going to get the growth at their size? They are very profitable and I think a successful execution gives them much better upside over the long haul. 

It is worth keeping an eye on but I am in no hurry to sell right now.  

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#2) On March 22, 2011 at 12:06 PM, leohaas (30.09) wrote:

#1, I get that, but isn't that like saying "They should have bought T-Mobile at any price". And if that were true, wouldn't Deutsche Telekom have held out to extract a lot more?

Bottom line: they'd rather be a larger less profitable company than a smaller more profitable one. Exactly what doomed LU!

Disclosure: I am a disgruntled LU castaway.

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#3) On March 22, 2011 at 12:39 PM, topsecret10 (< 20) wrote:

  Don't think this deal will get past antitrust....  MA BELL was broken up to prevent what ATT&T Is trying to do here. Become MA BELL  again !!!   The pressure from consumer groups and Congress to stop this will be Intense.... BUY SPRINT.... :)

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#4) On March 22, 2011 at 1:19 PM, leohaas (30.09) wrote:

#3: that is a real threat to closing the deal. What I foresee will happen is that regulators come up with a list of assets the combined company will have to shed, similar to the Exxon/Mobil merger. T will complain, but eventually comply.

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#5) On March 24, 2011 at 4:34 PM, leohaas (30.09) wrote:

More on this issue here!

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#6) On March 24, 2011 at 4:49 PM, 5mackDab (46.09) wrote:

I was watching AT&T for some time before buying then the night just before I entered my purchase I read about the takeover.  Spent a fair bit of time thinking through the acquisition.  Read all the message boards of T-Mobile customers complaining about T taking them out and how they were going to run as soon as there contracts were up.  I still went ahead with the purchase because

1) I still feel T is cheap even if they're overpaying.

2) If the deal goes through I believe the people that indeed do run are the minority and that the increased towers will mean fewer dropped calls which may make those who are wanting to run happier.  They also have less options of where to run.

3) Overall operational savings.

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#7) On March 30, 2011 at 10:54 AM, Momentum21 (96.85) wrote:

 leohaas - the street seems to like it so far... when is the last time AT&T moved like this in the course of a week? 

30.74 baby! : ) 

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#8) On May 03, 2011 at 4:14 PM, ajm101 (< 20) wrote:

I pity the fool that sells T.

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#9) On August 31, 2011 at 3:47 PM, leohaas (30.09) wrote:

With the Government suing to block the merger, an expert thinking the Government will prevail, and the stock down about 5% on this news, I am not so sure about my earlier sell recommendation anymore.

I have argued that T is overpaying, so seeing the merger blocked might be a good thing. But if the immediate costs to T are indeed a few billion dollars, and the business reasons the company had for pursuing it were good, then maybe this isn't good news for T stockholders.

At any rate, the company will have to spend a significant amount defending its position in court. And if it prevails, it will be after making quite some consessions. So I am not so sure this will be good for the company.

With all this uncertainty, buying T is still not a good idea.

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#10) On December 20, 2011 at 3:09 PM, Momentum21 (96.85) wrote:

I sold 1/2 my position at 29.04 to "pursue other opportunities" 

After using Skype on my iPad this past weekend I have more concerns about T maintaining earnings growth. From here I am just not as eagerly bullish as earlier in the year. Overall I am happy with my investment/dividends given market conditions this year. there are probably much better places to get your dividends these days though.  

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