However if you are interested in next takeover saga, start looking at Sprint for following reasons:
- Stock is down from above $20 to $8. It went all the way down below $6 when I noticed the stock (and took a small position)
- It is # 3 in US wireless market with over 40 million subscribers
- Have excellent service provider network
- Have a good but tired brand
- In last few quarters, it has been struggling and hence stock got crushed
- Provides an excellent opportunity as merger or takeover target
- It has enterprise value of $42-44 B with debt at $22 B
- With revenues of $40B and revenue multiple of about 2, it can command enterprise valuation of $80B (ATT has EV/revenue multiple of 2.5 and Verizon has 1.5). At 1.5 multiple, it can command valuation of $60 B giving stock price of about $13-14 at low end and $20 at high end
- Alltel which got bought by PE at $27B has about 11 million subscribers. This results into valuation of 2500 per subscriber. Sprint has 40 million subscribers. However the churn rate is high for Sprint subscribers. So if we apply 1500 to 2000 per subscriber, it comes to similar valuation of $60B to $ 80B ($14-20)
- Of course there are quite a few risks such as regulatory approval, mgmt churn, subscriber churn, heavy capital investment needs. But without risks there are no gains
/Shyam
3 comments:
You dont respond to my comments anymore... as seemingly the only reader of your blog that comments do you not want to have a discussion... Am i the lowley Cal State Acct. undergrad below intellingent conversation.
Hey ever seen this chart from the fed
non-borrowed reserves are -50bil for the first time in history (never before negative print)
http://research.stlouisfed.org/fred2/series/BOGNONBR?rid=19
I suppose if you dont respond Ill just assume you dont want to have an intelligent conversation
That's not the case. It's just that your comments need to be on the topic of blog I wrote. Please feel free to comment on Sprint which is topic of this blog writing and we can have some discussion
Sorry Shyam---
I just saw the title of your blog "Shayam's commentary on Markets" and assumed that you would be interested in discussing macro trends and news events regardless of the articles you write. I know a lot about mortgages, banks, accounting and securitization. I am trying to broaden my scope in macro trends and have branched more into playing broad indices although still i hold some focused plays. I am also pretty profeciant in risk managment and options trading.
Anyway it seems you are more interested in Risk Arb plays which is cool. Again I suggest the book Den of Theives. Great book all about Milken, Lasker Bletzbergs, boesky, icahn and even a bit of T. Boone. Boesky was the biggest badest risk arb ever. If you are interested in the mechanics of merger or risk arb, as well as how they played it back in the day this book will be like financial porn to you.
Anyway if you would like to discuss and debate macro trends that is fine with me, however talking about S doesn't really interest me. I know nothing about how wireless companies are run and valued. I can decipher and devour their financial statements etc... but when it comes to arb'ing a potential merger with DT ill take a pass.
Again I would enjoy discussing the markets in general if you would like too. Did you see Big Ben's speech and those charts he used. Pretty crazy IMO that they want to loosen GSE standars even further and lift capital requirments even more. For god sacks these guys are already gear at like 20x even more depending on calculations. 20x leverage is freaking insane.
well if you wanna discuss markets let me know
otherwise good luck to you
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