Macquarie Capital: Dump Verizon, If Dish Network And T-Mobile Merger Goes Through

The Wall Street Journal recently reported that DISH Network Corp DISH is in talks with T-Mobile US Inc TMUS for a possible merger, following which shares of both the companies opened strong on Thursday and were trading higher.

Kevin Smithen, Macquarie Capital analyst, was on CNBC to weigh in on this and to discuss why according to him Verizon Communications Inc. VZ becomes a sell, if this deal goes through.

Stock Already Pricing IN The Transaction

“Deutsche Telekom holds about 67% of the company and they have been quite active in talking about potential long-term exit for themselves, really since the Sprint deal fell apart,” Smithen said. “So, Deutsche Telekom may have more longer term this isn’t a strategic asset. They have talked about wanting to exit the U.S., recommitting the capital to the European market.”

He continued, “And so, they could sellout at a price and their perceived value that is lower than what some of the minority shareholders maybe expecting. And we think that price could be in the low to mid-40s and we expect a long 12 to 18 month regulatory review here in a primary deal and so we think the stock today at around $40 as the last sale is already pricing in a transaction which has yet to be announced.”

Sell Verizon

On why he thinks investors should sell Verizon if this deal goes through, Smithen said, “Verizon, we think, is boxed into a corner here. They have sold their fixed-line asset to frontier or some of that. There are reports out that they are in discussions to sell the remaining […] wireline assets to Altice. And, we think, Verizon is lacking a converge network strategy.”