US telecoms industry set for M&A negotiations frenzy

In 10 days, the Federal Communications Commission will lift a ban on telecoms companies engaging in merger talks, and Wall Street is betting on T-Mobile US, Sprint, and Dish Network to be the first ones out of the gate. Shares of these companies have soared over the past 12 months on expectations of deal talks, and are trading at up to 31 times forward earnings, versus the S&P 500 telecom services index's .5SP50 18 times.

The rich valuations could discourage acquirers, who also have to assume the risk that antitrust regulators may look askance at more consolidation in the sector after a wave of mergers in recent years, investment bankers and industry experts say. "It seems as though valuations have already jumped to a near certainty a deal will be announced and approved. You have to ask yourself whether T-Mobile is going to be as eager to do a deal as Sprint," said Craig Moffett, an analyst at MoffettNathanson.