Sprint/T-Mobile merger reports land with a thud in the market

Reports of Sprint Corp.’s $32 billion near deal to buy T-Mobile US Inc. landed with a thud Thursday.

Wall Street wasn’t buying it. Shares of both companies fell hard even as the stock market climbed nicely.

Nor did the news create a buzz among more than 50 industry analysts visiting Sprint’s Overland Park headquarters campus for a two-day business briefing. Sprint’s official line on the merger was silence, but even the analysts were ho-hum about the headlines.

“It’s such an old topic. Nobody really talked about it,” said Bill Ho, an analyst with 556 Ventures LLC who attended the sessions at Sprint.

Part of the problem is that the news remains tentative. None of the merger reports Wednesday cited sources by name, and each couched the terms as still incomplete.

One constant in the news was the roughly $40-a-share price tag on T-Mobile, which was 17 percent higher than shares had closed at before the reports surfaced.

Normally, buyout news rallies a stock. Investors weigh the prospects of a deal and even the odds of a competing bidder jumping into the game. There was none of that speculation Thursday.

Instead, T-Mobile shares fell 79 cents to close at $33.49, a 2.3 percent drop. Sprint shares lost 4 percent by falling 38 cents to $9.02.

“I think people were either hoping for a higher price or more details on it,” said Donna Jaegers, an analyst at D. A. Davidson & Co., who did not attend the Sprint event.

Mostly, market talk turned to the odds of a Sprint bid winning government approval should it officially seek approval to buy its smaller rival.

“For the record, we’re putting a 10 percent chance on the deal winning approval,” analyst Craig Moffett of MoffettNathanson Research told clients in a report.

Jaegers agreed. Both pointed to the unusually candid skepticism that has come from some officials at the Federal Communications Commission and the U.S. Department of Justice, each of which would have to sign off on a deal.

Others put the odds higher.

Kevin Smithen at Macquarie Research told clients in a note that he sees an 85 percent chance of Sprint making a formal bid for T-Mobile and a 55 percent chance Washington allows it.

But even Smithen said that’s no reason to buy T-Mobile shares. He pulled his buy recommendation in favor of a sit-tight strategy. His rationale is that prices already balance the prospects of the supposed deal and the risk of a deal not happening.

A $40-a-share Sprint bid could make T-Mobile shares worth $48.28 by the end of next year, his note to clients said. If none of this happens, look for $29.50 a share for T-Mobile, he said.

To reach Mark Davis, call 816-234-4372 or send email to