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TheStreet Open House

Who's Next to Buy T-Mobile After Sprint Deal Bustup?

Stocks in this article: S TMUS ILIAY DISH DTEGY

NEW YORK (TheStreet) -- Sprint  (S) and its parent SoftBank have given up on buying company T-Mobile (TMUS - Get Report) citing pressure put on by U.S. regulators concerned the merger could harm consumers by cutting the number of U.S. phone companies down to three.

Sprint had been working on the deal with Deutsche Telecom (DTEGY), T-Mobile's parent,  for the last few weeks. Only a few days ago Sprint has announced it was on track to announce a deal by September.

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But was it really regulatory pressure or was it a third party that broke up this potential marriage? And could another company already be planning to step in and deal?

Tuesday T-Mobile had rejected the $15 billion buyout offer from French mobile carrier Iliad (ILIAY). Did this rejection spur U.S. regulators to step up their resistance to the Sprint deal? The rejection of Iliad's offer may have been the last straw for U.S. regulators.

Now Deutsche Telecom may be looking to deal with Iliad again, even though it earlier rejected the offer as inferior to Sprint's. In the meantime, analysts think Dish Network Corp (DISH) might jump into the fray.

According to Bernstein analyst Paul de Sa stated, "Deutsche Telekom still has several exit options, the best strategically being Dish -- who would bring a material amount of spectrum, a customer base, the potential for video bundling, and experience in the U.S. market -- unlike international buyers (for example, Iliad) who bring nothing except cash and likely overly optimistic assessments of the transferability of their capabilities."

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This speculation is not without merit. Last year Dish was looking to buy Sprint before SoftBank stepped in and won. Iliad may have spoiled the party for the Sprint/T-Mobile deal but Dish may end up the ultimate winner.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates T-MOBILE US INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate T-MOBILE US INC (TMUS) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 2500.00% and other important driving factors, this stock has surged by 36.28% over the past year, outperforming the rise in the S&P 500 Index during the same period.
  • The revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 15.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 48.95% is the gross profit margin for T-MOBILE US INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, TMUS's net profit margin of 5.44% significantly trails the industry average.
  • Compared to other companies in the Wireless Telecommunication Services industry and the overall market, T-MOBILE US INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite the current debt-to-equity ratio of 1.58, it is still below the industry average, suggesting that this level of debt is acceptable within the Wireless Telecommunication Services industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.01 is sturdy.

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