Media firms CBS (CBS) and Viacom (VIA) are the most likely to merge if M&A rules are relaxed as a result of a proposed big telecom marriage, says an industry analyst. CBS stock was up on the news.
If the Trump administration approves the proposed merger of T-Mobile US (TMUS) and Sprint (S), other telecom and media companies may try to push through deals before the 2020 presidential election, UBS analyst John Hodulik said in a report to clients.
XCBS stock rose 1.5% to 47.86 on Monday. CBS stock has gained in the last eight trading sessions. Shares in CBS fell 25% in 2018.
One reason federal regulators could shoot down the T-Mobile and Sprint merger is that the deal would reduce the number of national wireless firms to three from four. Verizon Communications (VZ) and AT&T (T) are the two biggest wireless firms.
"We continue to believe the approval of T-Mobile/Sprint is a tossup and even if approved by the (Trump administration), could face opposition at the state level," Hodulik said in his note. "A positive outcome could also boost M&A appetite under this administration, suggesting 2019 could be the final window to ensure regulatory approval ahead of the 2020 presidential election."
The Department of Justice is appealing a court ruling that allowed AT&T to close its acquisition of media giant Time Warner in June 2018. Walt Disney (DIS), meanwhile, snapped up most assets of 21st Century Fox Entertainment. Comcast (CMCSA) won a takeover battle for satellite-TV broadcaster Sky.
AT&T, Disney, Comcast To Digest Acquisitions
AT&T, Disney and Comcast will likely be on the sidelines in 2019, says Hodulik.
"With higher leverage and rising rates, we expect large-scale M&A for each of these players to be off the table in 2019," said Hodulik. "We continue to believe a merger with CBS is the most likely outcome for Viacom. A deal would provide Viacom with more negotiating leverage with distributors while giving CBS more content to feed its growing (internet video) platforms."
The UBS analyst also speculated that Charter Communications (CHTR) could again turn acquisitive. Charter acquired Time Warner Cable and Bright House Networks in 2018. Hodulik says Charter could target Altice USA (ATUS).
T-Mobile stock gained 0.8% to 68.02 on the stock market today. T-Mobile stock is trading just 4% below a technical buy point of 70.78. Some analysts say T-Mobile will prosper even if the Sprint deal falls through. T-Mobile has been gaining revenue and subscriber market share vs. Verizon and AT&T for over three years.
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The post CBS And Viacom Merger Viewed As Likely, Though Telecom M&A May Slow In 2019 appeared first on Investor's Business Daily.
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