Wednesday, February 12, 2020

Deutsche Telekom Spikes as US Judge Makes Call on T-Mobile and Sprint Merger

Tags
  • Dollar
  • Gold
  • Euro
  • Stocks
  • Oil

What’s happening: Shares of Deutsche Telekom surged around 4% in Frankfurt after a federal judge ruled in favour of the $26.5 billion merger between the German telecom giant’s US subsidiary T-Mobile and US-based Sprint.

What happened: The all-stock deal, announced on April 2018, has been hotly contested, as it involves the merger of America’s third and fourth largest mobile carriers. To get the required approvals, the two companies have agreed to certain compromises, including to divest Sprint's subsidiary Boost Mobile wireless brand and wireless spectrum to Dish Network and keep prices unchanged for three years.

Although the deal has cleared some key hurdles, including the latest federal judge approval, a number of states are considering an appeal.

What the merger means for the US mobile landscape: The merger between T-Mobile and Sprint received approvals from the Federal Communications Commission and the Department of Justice. However, attorneys general from 18 states filed a lawsuit to block the deal on antitrust grounds, claiming the merger would lower competition and increase costs for consumers.

With the federal judge’s approval on Tuesday, the merger has cleared one of the biggest hurdles to expand their 5G ability. T-Mobile and Sprint announced that the combined entity will cover around 97% of the country with its new 5G network in three years.

The merged company will have a customer base of around 125 million and will remain the third-largest player in the US, behind market-leader Verizon Communications, with around 150 million customers, and AT&T, which has about 140 million. Most of Sprint’s customers will become T-Mobile customers, although no timeline has been mentioned for the transition. Customers on Sprint’s Boost Mobile plans will become Dish Network’s customers after the divestiture.

Shares of Sprint jumped around 78% in US trading on Tuesday, T-Mobile’s US stock climbed around 12% and Dish Network’s shares gained over 7%.

What’s next: Apart from the potential appeal by involved states, some smaller obstacles remain, including the ruling by the California Public Utility Commission. The merger deal has also been challenged by the Communications Workers of America, with the case still pending before the US Court of Appeals.

What to watch: The market will be looking out for any news from the companies to close the deal and decision from the California Public Utility Commission and other authorities to get all the necessary clearances.

 

SUPPORT & RESISTANCES FOR TODAY

Technical Levels

News Sentiment

EUR/JPY - 118.5 and 122.25

Negative

USD/CAD - 1.315 and 1.342

Positive

France 40 - 5875 and 61120.25

Negative

Gold - 1550 and 1610

Negative

Bitcoin - 7500 and 12300

Positive

 
 

MARKETS TODAY


Investors will be watching European stocks today, amid strong gains posted by many of the key indices on Tuesday.

Context: European stocks reached record highs, with the travel sector leading the rally. This came against news of the death toll related to the coronavirus, which has officially been named COVID-19, crossing 1,100 and confirmed cases reaching almost 45,000.

Despite the rising toll numbers, investor concerns eased after statements from China’s top medical advisor Zhong Nanshan provided hope of containment of the deadly virus.

Details: The Stoxx Europe 600 rose 0.9% to reach a new record of 428.47, while the German DAX also peaked to a record high, gaining 1% to close at 13627.84.

Other European indices also closed higher on Tuesday, with the FTSE 100, CAC 40, and IBEX 35 up 0.71%, 0.65% and 0.68%, respectively.

Shares of Tui surged over 13% on Tuesday, after the travel company posted narrower losses for its first quarter and boosted its revenue forecast. Other travel companies Air France-KLM and International Consolidated Airlines Group also joined the rally following the news.

NMC Health, which closed higher on Monday, was among the worst-performing stock on Tuesday, after KKR announced that it had not submitted any bid to buy the company.

After hitting a fresh 2020 low-level in the 1.0890 region, the EUR/USD pair recovered some lost ground and closed the day slightly higher, just below the daily high level of 1.0924. "

Why it matters: After Tuesday’s strong performance of the European indices, all eyes are on the region’s industrial production report, scheduled for release today. Investors will also keep a close eye on Brexit progress and China’s coronavirus.

What to watch: After posting 0.2% month-over-month growth in industrial production for November, preliminary estimates show a decline of 1.6% in December, with a 2.3% year-over-year decline. The markets could come under pressure if the data disappoints.

 
 

MARKET SNAPSHOT

EUR/USD (1.0917, 0.02%)

Dow ($29,244, 0.05%)

Brent ($54.95, 1.7%)

GBP/USD (1.2969, 0.14%)

S&P500 ($3,359, 0.03%)

WTI ($50.61, 1.3%)

USD/JPY (109.87, 0.09%)

Nasdaq ($9,536, 0.09%)

Gold ($1,571, 0.1%)

 
 
 

NEWS SHAPING THE MARKETS TODAY


  • Asian markets open mostly higher; China’s Shanghai index edges lower
  • Australia’s January consumer confidence rises
  • European markets close higher
  • Coronavirus death toll crosses 1,100, with over 44,500 confirmed cases
  • US stock markets close mostly higher with Dow ending flat

 

WHAT ELSE TO WATCH TODAY


South African retail sales, Brazil’s retail sales, Indian industrial production and inflation rate, speeches from Federal Reserve Chairman Jerome Powell, Federal Reserve Bank of Philadelphia President Patrick Harker, San Francisco Federal Reserve Bank President Mary Daly and the Energy Information Administration’s report on petroleum inventories in the US as well as the Treasury budget report.