Special Situations: T-Mobile (TMUS US)
Re-iterating SET-UP BUY
TMUS US: US$ 28.82
September 30, 2014
With T-Mobile trading so far off Iliad’s original offer of $33/sh and Deutsche Telekom minimum $35 asking price, a level that was reached during the summer, we recommend to buy the stock around the current share price as it relatively undervalued in the US/CDA cell space, and the possibility of a deal is still very much present (Dish is said to be interested; Iliad has not walked away and has said it will decide on whether to bid or not by mid-october). The fact that Sprint/Softbank gave up on the deal on regulatory uncertainties and that Iliad seems (for now) unable to get the financing it needs to bid-up, has made the stock correct by about 15%. This creates a trading opportunity, particularly as T-Mobile appears undervalued vs. its peer group. Given the relative undervaluation of T-Mobile vs the peer group, we would assume that the downside risk in the event of no deal at all would be limited and transitory. Moreover, T-Mobile has the better growth prospects in the sector. As such, we re-iterate our set-up buy recommendation on the stock.
FULL REPORT ATTACHED