Tonight, Cramer’s talking telco. He’s a bit worried about retailers right now, so he decided to dedicate the show to what he considers three great defensive plays. We already covered Verizon, a big phone company with a good dividend, wireless growth, and now the triple play. But for this segment, Cramer wanted to focus on a smaller, more speculative company.
Enter Alltel. Cramer thinks this wireless provider is ripe for a takeover. The company has what the big dogs want, he says, and that’s subscribers, especially in rural areas that companies like AT&T and Verizon find hard to penetrate. In telco, Cramer explains, the best way to grow isn’t building out your network, it’s buying one that already exists. So taking over Alltel would lend these bigger phones companies – Sprint, too – the growth they crave, and the Street loves.
A better reason Cramer thinks Alltel makes a good acquisition target is because it missed its numbers in its most recent quarter. Then, in both the press release and the conference call, management refused to comment on its ongoing “strategic review.” Cramer says he’s never heard a company say it was for sale on a conference call, but the quiet after reporting its earnings was about as close an admission as you could get.
Remember the Cramer canon: Never speculate on a takeover if the fundamentals aren’t good. Luckily, despite the missed quarter, AT is a solid company, so Home Gamers that do their homework on this one might want give it a look.
Bottom Line: We’re playing defense today in telco, but if you want to do a little takeover speculation, Cramer believes Alltel could be bought.
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