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AT&T, Verizon The Likely Winners In The Event T-Mobile-Sprint Deal Rumors Ever Come To Fruition

CMCSA, DOX, S, T, VZ, CHTR, TMUS | September 20, 2017

In case you have been living under a rock the past couple of years, T-Mobile US Inc (NASDAQ: TMUS) and Sprint Corp (NYSE: S) are considering a merger. The latest rumors started this week when a person familiar with the matter told reporters that SoftBank Group is willing to give up its majority ownership of Sprint.

In light of the most recent round of rumors, Baird analyst William Power provided an update on what traders should be watching for if a deal is announced. According to Power, any delays in the deal are likely due to valuations concerns on the part of T-Mobile. However, Power said there are clear scale advantaged to a merger that will likely keep both companies pushing for a deal.

Surprisingly, Power named Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) as two major beneficiaries of a T-Mobile-AT&T union. Power said AT&T would particularly benefit from reducing the number of nationwide competitors down to only three names.

Tower operators, on the other hand, would now be in a fierce competition for the business of only three potential customers. Power said Amdocs Limited (NASDAQ: DOX) could be hit particularly hard if T-Mobile and Sprint initially dial back spending in preparation for merger-related costs.

Another potential loser from a completed deal would be DISH Network Corp (NASDAQ: DISH), which could be left without a viable buyer for its spectrum moving forward.

Finally, Power said the deal would have no immediate impact on the cable business, but Comcast Corporation (NASDAQ: CMCSA) and/or Charter Communications, Inc. (NASDAQ: CHTR) could be interested in acquiring the combined company at some point down the line.

For now, Baird’s two top picks among the stocks mentioned are Outperform-rated Comcast and AT&T.