Telecom Stocks are Surging

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was largely unchanged in late morning trading Thursday. AT&T (NYSE: T  ) traded in line with its index, while T-Mobile (NYSE: TMUS  ) , Sprint (NYSE: S  ) and DIRECTV (NASDAQ: DTV  ) surged to the upside.

Markets closed for May Day
While the U.S. markets remained open on Thursday, many other major stock markets were closed in observance of the May 1 holiday. Most European markets were shuttered, including France, Germany, Italy, and Spain. Asian markets such as Hong Kong, China, and South Korea were also closed.

A lighter international day may have spilled over to U.S. stocks, as investors had little international news to react to.

Sprint will submit bid for T-Mobile
Both Sprint and T-Mobile shares were up more than 3% after Bloomberg reported that Sprint would make an acquisition bid for T-Mobile early this summer. The combined company may choose current T-Mobile CEO John Legere to be its chief executive. Legere has successfully turned T-Mobile around since becoming CEO in 2012, with the business adding millions of new subscribers in recent months.

T-Mobile's recent growth, however, may make an acquisition difficult. Regulators blocked AT&T's attempts to purchase T-Mobile, and something similar could happen to Sprint. The U.S. Justice Department is clearly interested in maintaining a competitive wireless industry, and merging Sprint with T-Mobile would reduce the number of major players. Nevertheless, investors are clearly buying up T-Mobile shares in anticipation of a windfall payout in the event of a deal, while Sprint shareholders should also benefit -- the combined company would be far more powerful and able to more effectively compete.

Source: Wikimedia Commons.

AT&T said to consider DIRECTV takeover
The Sprint/T-Mobile entity, if created, could pose a major threat to AT&T -- but AT&T isn't standing still. The Wall Street Journal reported that the wireless giant has approached DIRECTV's management about a possible takeover bid.

DIRECTV, primarily a provider of pay-TV services, wouldn't add much to AT&T's wireless business. However, it might allow AT&T to strengthen its offering to consumers via better bundled services -- pay TV with wireless phone service, for example.

It would also reduce the number of pay-TV providers in the industry. DIRECTV is the second-largest provider of pay TV in the U.S., while AT&T with U-verse is a major player. With those businesses combined, AT&T would be better able to negotiate with content providers, reducing the costs the company would have to pay to carry cable channels like ESPN.
 

Why AT&T is considering a bid for DIRECTV
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 


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