Don't Sweat $4B Fee, AT&T Sell-Off Presents Opportunity: Adami
In the after market, pro traders were attempting to understand what a $4 billion fee facing AT&T means for the stock.
The charge is what AT&T must pay after it scrapped its bid for Deutsche Telekom’s T-Mobile unit.
Developments were not completely unexpected.
The Justice Department sued to block the merger on Aug. 31, saying it would reduce competition and lead to higher prices.
Last month, the companies withdrew their application to the Federal Communications Commission after its chairman also opposed the deal.
Although AT&T has a $170 billion market cap, “the $4 billion charge is significant,” says trader Guy Adami. "What were they thinking when they put that in the agreement?"
“That’s an absurd amount of money,” Tim Seymour adds. "Someone should lose his job over that," they say.
However, they both say the company can handle the charge, and Adami sees the sell-off as a buying opportunity.
“With its dividend and defined trading range the way to trade developments is long letter T on the sell-off,” Adami says.
Trader Brian Kelly is on the other side – sort of. “I wouldn’t buy AT&T right now but I wouldn’t short it either,” he says. “You have to remember – now they’re going to have to build out their wireless network – there’s more costs coming.”
Trader Joe Terranova looks at the situation from a different angle. He thinks AT&T’s pain will be Verizon’s gain. “If you’re long Verizon, I’d stay with it,” he says.
Oppenheimer analyst Tim Horan suggests looking elsewhere. “For the towers the transaction falling apart is a huge positive.”
Had the deal gone through, AT&T's purchase of T-Mobile would have made it the largest cellphone company in the U.S. Currently, AT&T is the country's second-largest wireless carrier, while T-Mobile is the fourth-largest.
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Trader disclosure: On Dec 19, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns C; Adami owns GS; Adami owns INTC; Adami owns MSFT; Adami owns NUE; Adami owns BTU; Adami owns AGU; Terranova owns TRLG; Terranova owns SWN; Terranova owns SU; Terranova owns VRTS; Terranova owns IBM; Terranova owns LQD; Terranova owns MUB; Terranova owns EMC; Terranova owns CSCO; Terranova owns AXP; Terranova owns SBUX; Kelly is short UBS; Kelly is short BCS; Kelly is short SLX; Seymour is long KRE; Seymour is long IWM; Cortes is long SO; Cortes is long TSN; Cortes is long SVU; Cortes is long Treasuries; Cortes is short AAPl; Cortes is short XRT; Cortes is short Crude
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