T-Mobile (TMUS) to be acquired?
First off, let's look at Market Cap. It's hard to find an accurate number. Google Finance states that the Market cap is $13.62B. Yahoo Finance reports $5.53B. Finviz reports $3.5B. Both of the brokerages that I use, Tradeking and TD Ameritrade, match Finviz at $3.5B. I don't know where these numbers are coming from, but no one seems to know the real market cap of TMUS. After pouring through their latest SEC filings, I still haven't come up with a solid answer. For the sake of this article, we'll go with $13.62B that Google Finance is reporting.
You might be wondering at this point how a company that had a $39B buyout offer from AT&T (T) just a few short years ago is now only worth $13.62B. Why isn't the market cap higher?
The answer: Debt. Due to the way TMUS structured its merger of Metro PCS, the old owner of T-Mobile, Deutsche Telekom (DT) has "indentured" TMUS with debt to be paid out starting in 2019 - to the tune of $11.2B. This way, any company buying TMUS would take on that debt, and DT wouldn't lose out on its investment. DT also owns 70% of the stock - but has a lockup period of 18 months before it can sell.
Valuation: Now let's talk about valuation. We think the $39B buyout offer from AT&T (T) was a little bit on the high end. However, T-Mobile's spectrum alone is worth $26B as an "indefinate intagible asset", according to their latest SEC Filing.
So, with a 40 million customers and a big chunk of Spectrum, a $30B-$35B price tag does not sound that outlandish at all. Dish Network currently has a bid on Sprint for $25B.
Let's say a potential suitor comes along and offers a deal for TMUS. The deal would most likely be for around $20b for the stock (plus taking on the $11B in debt). This would be fairly reasonable at a total price of $31b.
If the buyout does occur in the near future, it could mean a share price of approximately $30 a share at buyout.
This would be a drop in the bucket for Potential suitors like SoftBank, Google (GOOG), or Direct TV (DTV).
Mastery Bottom Line:
TMUS has been flying under the radar for the last couple of weeks after IPO. Not many investors/traders are even aware the company has gone public. The downside risk here is very limited with a lot of upside potential. Of course, do your own due diligence before investing in TMUS.
Lastly, in case you missed it - T-Mobile CEO Jon Legere was on CNBC on May 1st (the day of the TMUS IPO) sounding like he's ready to sell the company already. Here is a link to the video. One of the potential players is Dish Networks, and Legere said that he would "love to talk to them."
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