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Sprint, T-Mobile soar after judge OKs deal; Cisco stumbles on revenue forecast

Shares in Sprint Corp. and T-Mobile US Inc. surged for the week ended Feb. 14 following a federal judge's long-awaited nod to a tie-up between the third-and fourth-largest U.S. wireless carriers.

In a Feb. 11 order denying a state-led appeal of the T-Mobile and Sprint transaction, Judge Victor Marrero of the U.S. District Court for the Southern District of New York said the combination of Sprint and T-Mobile was not "reasonably likely to substantially lessen competition" in the U.S. wireless market, given both the character of the companies involved and the dynamic nature of the marketplace.

The case had centered on claims from more than a dozen state attorneys general that a combination between Sprint and T-Mobile would harm innovation and lead to higher prices for consumers.

The companies estimate the deal could close as soon as April 1.

New Street Research telecom analyst Jonathan Chaplin was optimistic on the ruling, saying it "paves the way" for T-Mobile to "fundamentally disrupt" the U.S. wireless market while creating opportunities for DISH Network Corp. "to do the same."

As part of concessions the companies made to win federal approval of the deal, DISH will buy Sprint's prepaid business and 14 MHz of Sprint's nationwide 800 MHz spectrum.

T-Mobile and Sprint will also be required to make at least 20,000 cell sites and hundreds of retail locations available to DISH. The combined T-Mobile and Sprint must also provide DISH with "robust access" to the T-Mobile network for seven years as the satellite company builds out its own 5G wireless network.

Around midday Feb. 14, Sprint shares were trading up nearly 77% from their Feb. 7 close, at $8.73 apiece; T-Mobile stock was trading up 12.39% for the week, at $96.03 per share.

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Turning to tech, Cisco Systems Inc. shares stumbled this week after the company's fiscal second-quarter 2020 results beat analysts' estimates but continued to forecast a year-over-year decline in revenue.

For its 2020 fiscal third quarter, Cisco forecasts revenue to decline between 1.5% and 3.5% year over year.

On Feb. 12, the company cited Brexit, the U.S.-China trade deal and more recently, the coronavirus epidemic, as some of the global macro-environment factors behind "longer decision-making cycles" across Cisco's customer segments.

However, Cisco expects to see customers pick up spending once the company releases new platforms that will take advantage of industry-advancing growth drivers, such as 5G, the transition to 400-gig architecture, Wi-Fi 6 and the shift to cloud.

Cisco stock was trading at $46.80 midday Feb. 14, down 2.45% for the week.

Meanwhile, Altice USA Inc. stock inched up slightly this week following the cable company's results for the just-ended quarter, in which executives were optimistic that a combined T-Mobile will prove to be a strong long-term partner for Altice's mobile business.

Altice has an existing full mobile virtual network operator agreement with Sprint, under which Altice has access to Sprint's network capacity and Sprint has access to Altice's wired network infrastructure, including its fiber footprint. T-Mobile has pledged to maintain the agreement with the cable operator.

Speaking during the company's earnings conference call on Feb. 12, Altice CEO Dexter Goei said T-Mobile's agreement to extend the existing MVNO agreement for the duration of its consent decree with the U.S. Department of Justice — seven years from the date of the deal closing — is a "significant win" for Altice.

Pivotal Research Group analyst Jeffrey Wlodarczak was enthusiastic that Altice's partnership with the new T-Mobile could fuel future M&A opportunities.

"The back-from-the-dead S/TMUS deal is a huge win for Altice as it gives them the most attractive wireless MVNO in the U.S. (for 7 years) and could be the spark that induces Charter Communications Inc. (or possibly Comcast Corp.) to make a play for the company," he wrote in a Feb. 12 research note.

Altice shares were trading at $28.51 midday Feb. 14, up 2.76% for the week.