T-Mobile and Sprint Shares Drop as AT&T Goes to War

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was rallying early on Friday, up 23 points as of 11:32 a.m. EST. Telecom stocks, however, were broadly lower. Dow components AT&T (NYSE: T  ) and Verizon Communications (NYSE: VZ  ) were down just slightly, while Sprint (NYSE: S  ) and T-Mobile (NYSE: TMUS  ) shares experienced notable declines.

Bernanke set to give speech
There were few economic releases early on Friday, as traders may have been bidding up stocks ahead of this afternoon. Departing Federal Reserve Chairman Ben Bernanke is set to address the American Economic Association in Philadelphia at 2:30 p.m. EST. It's possible that Bernanke could make some remarks that would support further Fed action toward stimulating the U.S. economy. If he does, stocks could continue their rally late into the afternoon.

AT&T goes to war with T-Mobile
But telecom stocks were not participating in the rally. The move lower in shares of AT&T, Verizon, and T-Mobile may have been sparked by AT&T's announcement today that T-Mobile customers can get $450 in AT&T credit for switching networks.

T-Mobile made waves in 2013 with a series of radical announcements that it collectively called its "un-carrier" strategy. By doing away with subsidies and dumping two-year contracts (among other things), T-Mobile has become the nation's fastest growing wireless carrier. Given that both are GSM carriers, it's possible that many of T-Mobile' new subscribers are former AT&T customers -- bringing an AT&T phone over T-Mobile can be as easy as switching out a SIM card. AT&T's announcement on Friday may have been an aggressive move to bring some wayward customers back.

AT&T's initiative has the potential to draw millions of subscribers from T-Mobile. It suggests that the wireless industry in general is becoming much more competitive, weighing on the business prospects of all companies involved. Verizon, for example, could be forced to offer similar incentives in the future, which might be why investors sold Verizon shares Friday morning.

Sprint hit by downgrade
Sprint, as one of the nation's largest wireless carriers, also stands to lose, but Friday was particularly bad for the company for other reasons. Analysts at Stifel Nicolaus downgraded Sprint stock to sell. Sprint shares are up an astounding 80% in just the last year. On Friday, however, they fell about 4.4%, back into the single-digits. 

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  • Report this Comment On January 03, 2014, at 1:15 PM, ddeleo wrote:

    This may give Sprint the ammo they need to convince the FCC to let them buy TMobile.

  • Report this Comment On January 03, 2014, at 8:23 PM, DalePlourde wrote:

    Hi there all,

    Re. Bernanke making a comment re: possible further stimulus of economy, ultimately many investors and traders are starting to focus on fundamentals and companies with lower multiples, growing earnings, growing revenue, competent/dedicated management, steady/strong balance sheets, ect.. hence many non-momentum stocks like conagra foods (personally I am vegetarian, but this is a great valued broad food/meat company, undervalued compared to it's industry average by far, very innovative food scientists ect..), lazyboy, and the like are appreciating. It is in the best interest for the market to return to fundamentals, earnings ect..

  • Report this Comment On January 03, 2014, at 8:24 PM, DalePlourde wrote:

    With a relatively high yielding ex-dividend date on Tues, Verizon should move up on Monday, as last of course for dividend.

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