T-Mobile Proves Regulators Were Right on AT&T Bid

T-Mobile continues to make life difficult for AT&T and Verizon Wireless

Jan 8, 2014 at 7:00PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Better-than-expected additions to private payroll numbers and Federal Open Market Committee minutes that show the Federal Reserve plans to "proceed cautiously" in reducing the pace of its bond purchases -- neither of these were enough to raise the market's temperature today, as stocks ended Wednesday unchanged, with the the S&P 500 off by just two hundredths of a percentage point. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) fell 0.4%.

Within the oligopoly of cellular carriers, T-Mobile (NASDAQ:TMUS) continues to play the iconoclast. Last Friday, AT&T (NYSE:T) announced that it will offer a credit worth up to $450 to get T-Mobile customers to switch carriers, but that move only pre-empted a widely anticipated offer from T-Mobile, which was announced today.

The termination fee-killer
Here are the details of T-Mobile's offer: In an aim to neutralize the termination fee as an obstacle to switching providers, the upstart carrier will offer new customers that incur such a fee from their old provider up to $350 per line and up to $300 in credit to trade in their old phone.

The offer is only available to customers of the top three carriers, AT&T, Sprint (NYSE:T) and Verizon Wireless. The shares of the three "targets" didn't react the same way to the news: AT&T and Verizon (NYSE:VZ) fell 2% and 1.6%, respectively, while Sprint rose 1.1%. (Note, however, that both AT&T and Verizon went ex-dividend on Wednesday, which would explain a significant portion of the price declines.)

Sprint is reported to be preparing a bid for T-Mobile -- perhaps the divergence indicates the market believes a tie-up is possible, or it could simply be that investors believe the two largest carriers stand to lose the most from T-Mobile's action. Naturally, T-Mobile isn't immune to competitive pressure -- last Friday's announcement from AT&T coincided with a 3.3% drop in its stock price.

While T-Mobile's combative approach may reduce aggregate industry profits, it's a boon for consumers (full disclosure: I'm a satisfied T-Mobile customer) and it justifies regulators' decision to quash AT&T's 2011 bid to acquire the company. Does anyone really believe the industry would be as competitive today if T-Mobile had been folded into AT&T? Furthermore, while it chips away at the profits of its larger rivals, T-Mobile is accruing long-term value for its shareholders by creating goodwill with its customers (old and new). If Sprint wants to get its hands on that value, expect T-Mobile to ask for a hefty acquisition premium -- assuming regulators don't step in first.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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