US telecoms – softly ticking

Shares for AT&T and Verizon have underperformed the market by 9 percent and 5 percent respectively since October but have performed in line with the market for 2012 and have outperformed over two years. The shares trade at a slight premium to the market. Yet these pseudo-duopolists, which sit atop the US wireless telecoms market, are facing a radically different competitive environment than they did a year ago. SoftBank’s purchase of Sprint and the latter’s subsequent acquisition of Clearwire create a better-funded number three with the spectrum to launch low-priced wireless data products. Nor is Sprint the only problem: the T-Mobile/MetroPCS merger (if it is not interrupted by a counterbid) creates a fourth player just strong enough to grasp for market share, adding to the price pressure Sprint is all but certain to create. Meanwhile, Dish Network has a nice chunk of wireless spectrum it could add to one of the smaller competitors’ war chests. The next few years are going to be fun to watch – from a distance.