REUTERS: What did T-Mobile and Cogent Communications just do?
September 7, 2022 —
5G wireless versus wireline?
Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by Reuters in an article — by Yuvraj Malik, “T-Mobile sells wireline business to Cogent for $1, expects hefty charge” — regarding T-Mobile’s sale of its wireline business (originally acquired from Sprint) for one dollar. You could almost hear a pin drop on the announcement!
Why would T-Mobile shed its wireline business?
From a business perspective, this was a bold move for both parties, but especially for T-Mobile, which sold assets for practically nothing and entered into a contract to pay Cogent Communications for services-following the news, T-Mobile’s stock was up on the day. For each company, the move allows them to focus marketing and capital expenditures on their main business services: 5G wireless services at T-Mobile and long-haul wireline network products at Cogent.
Quoted article excerpt is below:
“We think that T-Mobile must be receiving some sort of discount on the IP transit services that they will be buying from Cogent contractually, and they will save on the costs that they’d otherwise have to keep, maintain and improve (the infrastructure),” said Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors.
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22-53