If at first you don't succeed, try again. That's the approach AT&T
The fact is, AT&T is under a lot of pressure to add wireless spectrum, which are airwaves that provide video and other data services to customers. Had it completed its bid for T-Mobile, AT&T would have increased its 4G spectrum capacity by 62%.
Spectrum is important because the more spectrum a company has, the more market share it can reach. As you could imagine, the battle for the airwaves is an aggressive one.
Companies with claim to spectrum have quickly become merger and acquisition (M&A) targets for larger companies, and they don't come cheap. If AT&T completes a bid for Dish Network, it may pay the highest premium in more than a decade.
Business section: Investing in wireless communications takeover targets
Wireless communication is expected to be a massive growth industry for years to come, and companies are willing to spend big money to come out on top. In this case, acquiring spectrum, or companies with spectrum, is an effective means of ensuring dominance in the market.
When a company announces that it is acquiring another, the target's stock often jumps in price to reflect the takeover premium being paid for the company. This is why analysts pay special attention to rumored potential takeover/leveraged buyout (LBO) targets.
The kind of enthusiastic spending big names like Verizon, AT&T, and Sprint are engaging in could lead to some upside potential for wireless communication takeover/LBO targets.
Are you interested in trading on the trend? We identified three potential takeover/LBO targets in wireless communications from various sources including iStockAnalyst and Seeking Alpha. Do you think these companies are attractive takeover candidates? (Click here to access free, interactive tools to analyze these ideas.)
2. Leap Wireless International
3. MetroPCS Communications
4. Telephone & Data Systems: Provides wireless and wireline telecommunications services in the United States. Market cap of $2.89B. Might be undervalued at current levels, with a PEG ratio at 0.91, and P/FCF ratio at 8.06. The stock is a short squeeze candidate, with a short float at 8.89% (equivalent to 13.69 days of average volume). The stock has had a couple of great days, gaining 7.2% over the last week.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Data sourced from Finviz.