Feb 12, 2020
We've got a new "Big 3" in wireless: T-Mobile + Sprint gets approved Read More I approve this relationship... Judge Victor Marrero to T-Mobile and Sprint. Approval of the biggest merger in the wireless industry powered Sprint stock up 77% (investors we're expecting this outcome). If the opinion remains unchallenged, we're left with 3 major carrier choices: Verizon, AT&T, and the new T-Mobile (that ate Sprint). Here's the history of this complex courtship:
June 2018: T-Mobile's CEO announces that his company has agreed to merge with Sprint. The combo company – valued at $146B – would be split between 3 owners: Deutsche Telekom (T-Mobile's parent), SoftBank (which owns most of Sprint), and retail investors like you and us who own remaining shares.
November 2019: The Department of Justice and the Federal Communications Commission approve the merger under certain conditions... But 13 states plus DC sued to block the deal, saying it would hurt competition and lead to pricier phone bills.
Sprint has been lagging rivals for a while... so the judge doesn't think this deal will substantially hurt competition. Plus, regulators will make sure that Dish Network enters the game as a viable new service provider. Sprint will have to sell Dish 9M customers, but that'll still be a distant competitor to the Big 3.
The Takeaway:We have a three-opoly on our hands... Here's the pecking order now: Verizon #1, New T-Mobile #2, and AT&T #3. And a three-opoly could affect your bill:
Interpretation A: Competition has been reduced, now that we've gone from 4 major players to 3. When there's less competition, companies tend to charge higher prices.
Interpretation B: Actually, this merger increases competition, because Sprint was never a real player and T-Mobile wasn't big enough to compete over future 5G networks. Now T-Mobile + Sprint can effectively challenge AT&T and Verizon. Jan 10, 2020
Verizon is "disrupting itself" by making cable TV less painful for customers Read More If you can't sell it... Subscriptify-it. Verizon claims it just "disrupted the cable industry" by ending mandatory 12-month contracts for cable TV and eliminating "extra" fees (they still want normal fees). The goal is to revive its Fios business (fun fact: Fios is an abbreviation for fiber optic service), which is doing fine selling internet — not as fine selling cable TV.
The status quo: Brutal customer service, inflexible contracts with early termination fees, and (more) fees that make your $80 service cost $100. That's cable TV.
The result: Cord-cutting rages ahead as TV bingers save $$$ using their internet to stream instead — 67K customers ditched Verizon cable TV just last quarter.
Verizon's new goal: Slow down cord-cutting by becoming more like the streaming industry.
"Mix & Match"... That's the name of Verizon's new Fios offer — the idea is to make your cable/internet service totally flexible from month to month, with changable channel bundles and upgrade/downgradable internet speed. You know, control of what you're buying without needing to commit for 12 months (it's 2020. Commitment is scary).The Takeaway:Cable is a classic "pros before cos" industry... (profits before customers). Amazon is loved by customers because one of its key values is "customer obsession." Cable is profit obsessed — using its local monopoly to squeeze out your money with brutal year-long contracts and fees ($10/month equipment charge?). Thanks to competition from streaming, Cable's pros before cos strategy is dying. Sep 10, 2019
AT&T gets an "open letter" from a hedge fund to basically change everything Read More Haters gonna hate... Only some release a 23-page open letter about it. Hedge fund Elliott Management just sent one to AT&T after splurging $3.2B for a 1.2% stake in the telecom giant. The letter's core theme: Change (almost) everything. Here's how to interpret the Real Housewives-style takedown:
It's not personal, AT&T: Elliott has "tremendous respect for the Company’s legacy."
But there's a problem: Over the last 10 years, the broader market (the S&P 500) has risen 193% — but AT&T only rose 42%.
So it's time for a makeover: Specifically, cut the CEO and the board – Elliot thinks that “this is the moment to determine the right team for the next decade.”
Take the free advice and everyone wins: The fund thinks its proposals could push up AT&T stock by 65% in 2 years.
FYI, the fund doesn't own enough stock to force AT&T management to listen — but shares jumped because investors hope it does.
Here's the problem... There are a lot of problems facing AT&T. The hedge fund spent pages 2-23 covering them.
The botched iPhone: AT&T enjoyed exclusive rights to sell iPhones when they launched — but its poor service quality ended that.
The identity crisis: Verizon snagged the high-end wireless market while T-Mobile/Sprint grabbed the low-end — AT&T was awkwardly left in the middle.
The brutal acquisitions: AT&T has dropped a hefty $200B on them the last few years — it bought DirecTV at its peak, and satellite TV has only lost subscribers since.
The Takeaway:AT&T is a tech company led by landline guys... That's the biggest issue. The current CEO has run things for 12 years, and the newly-promoted COO's telecom roots go back to 1998. But now AT&T is a tech media company that owns streaming tech and HBO — that means it competes directly with Netflix. Elliott wants leadership to be more iPhone, less landline. Jun 21, 2019
Dividend stocks are living their best lives thanks to the Fed Read More So we’re cutting rates now?... Wednesday, America's central bank set the stage to reduce interest rates nationwide later this summer. It’s a sign those wise government bankers are concerned the trade war could hurt the economy, so they’re saying “we got your back” — Lower rates would support borrowing, potentially offsetting trade war pain. The Fed hasn’t cut interest rates yet, but markets are acting like they have...
Mortgage rates: A 30-year house loan had a 5% average interest rate in November. Now it’s down to 3.86%, close to record low levels.
10-Year US government bonds: The interest the government pays for 10-year loans dropped below 2% yesterday for the first time since 2016.
We're talking supremely unsexy industries... Electric utilities, packaged goods, wireless — lower rates could change that. NextEra Energy, Procter & Gamble, and Verizon don't have the cachet of self-driving meal kits startups these days. But they all boast profitable track records and hook up shareholders with cash dividends every quarter. Most fast-growing companies don't pay dividends at all.The Takeaway:Everything’s relative... The dividends of these companies haven’t changed much since December. But interest rates overall have. With lower rates today compared to December, these dividends look good to investors that just want reliable cash payments. That's why the Fed's words Wednesday are bringing sexy back.
