• Sprint Stock Review

    Sprint Stock Review

    6, Sprint (NYSE:S) stock jumped on merger news.The government announced that it was conducting a thorough review of the proposed merger between Sprint and T-Mobile (NASDAQ:TMUS). Community Stock Ratings for Sprint Corporation (S) - See ratings for S from other NASDAQ Community members and submit your own rating for S. Sprint appears willing to accept a deal without a breakup fee. Government officials are already wanting reviews of the merger prior to any official announcement.

    Has signed a merger agreemengt that will value Sprint at about $26.5 billion, people familiar with the matter told CNBC, and will place T-Mobile's chief in the top job. The all-stock deal will be announced on Sunday, said the people, who asked not to be named because the negotiations are private. The transaction values Sprint at 0.10256 per T-Mobile share, or $6.62 a share based on T-Mobile's Friday closing price of $64.52, said the people. The combined company with T-Mobile will have an enterprise value of about $140 billion. John Legere will run the company, which will have dual headquarters in Bellevue, Washington and Kansas City, according to one of the people. Some Sprint executives are expected to remain with the company even after a deal is announced, the person said. SoftBank, which owns about 85 percent of Sprint, will allow Deutsche Telekom, which owns almost two-thirds of T-Mobile, to consolidate the new company's earnings, said the people.

    There is no breakup fee associated with the deal, they said. However, there is a roaming agreement that will kick into effect between the companies if a deal is rejected. Sprint customers would be allowed to use T-Mobile's network if they're out of range, two of the people said. The new company will be about two-thirds owned by T-Mobile shareholders and one-third Sprint, with board representation in line with economic ownership, one of the people said. The deal concludes several years of negotiations between the companies. Talks most recently broke off late last year after SoftBank CEO Masayoshi Son decided he didn't want to lose control of a combined company.

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    Deutsche Telekom will own more than 40 percent of the new company, with SoftBank's ownership just below 30 percent. Several things changed over the last few months that led Son to change his mind, including greater synergies from lower corporate taxes, an increased understanding of how much 5G deployment will cost Sprint, and a rapidly changing competitive wireless landscape that now includes cable providers, the people said.

    Sprint

    Last week, and, the two largest U.S. Cable companies, announced an extended partnership agreement that will allow each company to develop products and services. Another major factor was a shared fear among Sprint and T-Mobile that Verizon and AT&T will deploy 5G technology in select markets as soon as later this year, two of the people said. This expedited deal talks, as both companies initially believed they would have more time before 5G rolls out. Still, the most important change may have been the settling of Sprint and T-Mobile share prices after months of deal speculation last year inflated both stocks, two of the people said. The $6.62-per-share price for Sprint is lower than what Sprint nearly accepted last year, one of the people said. A deal announcement doesn't mean a merger will actually happen.

    Combining the third- and fourth-largest wireless U.S. Providers in a market with only four participants — Verizon, AT&T, T-Mobile and Sprint — could be a hard sell for U.S. AT&T attempted to buy T-Mobile in 2011, only to have regulators block it on anti-competitive grounds. Disclosure: Comcast is the owner of NBCUniversal, the parent of CNBC.

    Sprint (S), the cell phone service provider company that gets no respect, may finally start to, especially if the company adds Apple's iPhone 5 this fall, in a much speculated-about And, my analysis argues that if Sprint gets the iPhone 5, it will be not only a game-change, but also be an image-enhancer, and morale-booster for Sprint: all three are critical for the company, moving forward. Sprint: High-Risk Stock, With/Without iPhone 5 However, keep in mind that even with the iPhone 5 (and certainly without the iPhone 5), Sprint is a high-risk stock not suitable for low-risk or moderate-risk investors.

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    Don't consider Sprint if you can't tolerate a more than 50-70% loss or seeing your entire investment wiped out - it could happen. First, undoubtedly, the iPhone 5 would lead to subscriber growth, with less attrition. Sprint boasted roughly 52.1 million wireless subscribers as of the second quarter. Second, most likely Sprint's revenue, which totaled $32.3 billion in 2009 and $32.6 billion in 2010, with the iPhone 5 would rise more than the 2.9 percent to 3.2 percent revenue growth many analysts are projecting for the company in 2011. The two percent revenue growth for 2012 also would look a tad light.

    The for S are a loss of 82 cents and a loss 67 cents. That FY2011 EPS loss estimate looks about 30-35 percent high, and the FY2012 EPS loss estimate looks about 60-65 percent high, according to my analysis.

    Each loss estimate of mine assumes Sprint secures the iPhone 5. IPhone 5: Cache Factor Third, The iPhone 5 will further shore-up Sprint's brand image. Hurt over the previous decade by a cell phone network that underperformed, to say the least, that reputation has stuck to Sprint, when, in reality Sprint's network has been improving over the past three years. So has its customer service, and its decent line of smartphones and related devices will only be enhanced if the iPhone 5 is successfully recruited - something that would continue Sprint's operational momentum.

    The iPhone will also help company morale: employees will finally know they are working for a company that's not merely surviving, or looking to be bought, but a company that could strengthen to compete with cell phone service provider giants AT&T (T) and Verizon (VZ). Finally, there's the cachet factor. Even if Sprint secures the iPhone 5, it can't tell institutional investors - the big guns who help to determine share price values - that it's going to match the operational and earnings performance of AT&T and Verizon in a year - but it can say the company is getting to the point where it's a contender, again and that may encourage some investors to get ahead of the game and start loading up on shares. Technically, Sprint's shares, which closed Friday at $3.53, formed this spring at $6, dropping to about $3 in August. Sprint remains below the key, 50-day moving average and the 200-day moving average, but the view from here argues that a bottom is in place at/near $3.

    Sprint's shares should trade above $5 by the end of 2011, and above $6 by the end of 2012. Stock Category: Sprint is not a stock for anyone seeking a guaranteed capital gain in the year ahead. Sprint's shares could pop 50 percent higher, but they could just as easily meander or plummet 30 percent,or even more. Consider Sprint only if you have the patience to wait 2 years to realize a capital gain. There's also a 50 percent chance you'll lose your entire investment with S over a 10-year period. 2011 Outlook: I view as Sprint a long-term play, but if you're looking to sell S within the year, it's probably best to take your profits after it rises to $4.50-4.75 fails to rise above $5.

    Stock Analysis: Sprint Nextel Corporation is a high-risk stock. If an investor has already purchased the company's shares, I'd hold them.

    If not, I'd consider buying a 50% position in S now; then buy another 25% in two months, if U.S. Economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of my S position before January 2012 and I'd put a sell/stop loss at: $1.25.Disclosure: L.C. Jacobs of New York, N.Y. Reviews stocks on a quarterly, semi-annual, and annual basis. Jacobs has no positions in stocks reviewed, but does own federal, municipal, and corporate bonds.

    Sprint Stock Review