This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

AT&T's M&A Failure Is a Game Changer

NEW YORK (TheStreet) -- Make no mistake, the breakup of AT&T's (T) proposed $39 billion merger with T-Mobile USA is a game changer.

The failure of the deal is likely to change telecom industry dynamics so that margins are pressured by lower pricing and capital spending. At the same time, as if enough wasn't already going right for Apple (AAPL), the company looks primed for a windfall as use of its iPhone and iPad products proliferates, along with purchases from its App store.

"The fragmentation of the carrier universe is almost certainly a positive for handset makers and suppliers to the [wireless] industry," said Craig Moffett of Sanford Bernstein in December after the Department of Justice blocked AT&T's acquisition of T-Mobile, which would have been the biggest deal of 2011.

For AT&T, Verizon (VZ), Sprint (S) and T-Mobile, among others, the decision means that they may need to plow billions more into developing networks to handle smartphone data, instead of consolidating. Added choice among national carriers, lower data prices and improved coverage may quicken smartphone adoption, adding to the topline of device makers like Apple, even as it cuts at the bottom line of national carriers like AT&T and Verizon.

"When the deal was first announced in March it looked like we were poised for consolidation from four major players to three," wrote Moffett. "As the year closes, it looks more like we're headed from four to five (let's assume for a moment that at least one of Leap (LEAP)/MetroPCS (PCS), Dish Network (DISH), LightSquared, or Clearwire (CLWR) builds a national presence)."

For Verizon and AT&T investors, who've been wooed by the 5% dividend yields of the telecommunications sector vs. low bond returns elsewhere, a more fragmented wireless market is cause for "caveat emptor." Calling investors "coddled" by high dividend yields, Moffett wrote "we fear investors are utterly unprepared for upcoming weak wireless margins on the back of staggering iPhone subsidies."

For more on telecommunications stocks see 10 S&P 500 Stocks For 2012 from Scott Rothbort of Lake View Asset Management. For more on Apple see, 5 tech stocks to watch if QE3 happens.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs