Auto Sales Surge; ATT - T-Mobile Story -- Idle Rambling -- Not a Bakken Story

Updates

May 11, 2012: No link; from print edition, Wall Street Journal, page B5.

T-Mobile said it lost more than a half million of the most lucrative customers in the first quarter, casting doubt on whether the company can regain momentum after regulators blocked its sale to ATT.

Predicted. This, as noted below, was a win-win for ATT. At best they would have gotten T-Mobile all to themselves. At worse, ATT and Verizon would split the spoils as T-Mobile sort of just withers away. This happened some years ago when regulators refused to let two video rental chains merge. One of the two eventually disappeared (going through bankruptcy first?). The other? I don't know if it's still around.

Later: I posted the stories below earlier today.

For the first time this afternoon I have finally had an opportunity to check the news, and this is the story that caught my eye:

Headline: T-Mobile customers fleeing

See my post below, predicting that this would happen.

Original Post

Idle rambling.

Connecting two disconnected dots.

First dot: auto sales surge.

U.S. factory orders rose strongly in July on the biggest jump in demand for autos in more than eight years and a surge in commercial airplane orders.

The Commerce Department says factory orders climbed 2.4 percent, the largest increase since March. Orders for motor vehicles and parts rose 9.8 percent, the largest one-month gain since January 2003.

Second dot: housing sales down.

The already-struggling housing market has another 15% decline in home prices already priced in for homebuilder stocks, according to Stifel Nicolaus analyst Michael Widner.

According to a talking head on CNBC this a.m. the government has made it easier for banks to get out from under their mass of foreclosed homes prior to 2011. However, the relaxation was not extended to new home sales going forward. For any number of reasons, the new rules imposed on banks for home financing have become much more onerous. This is one explanation for disappointing home sales according to the talking head on CNBC.

It's hard to argue with that logic in light of the surge in auto sales. The surge in auto sales suggests that folks have the money to make large purchases, but a) are still scared of the housing market; and, b) unable to get financing due to onerous banking requirements.

A third factor that folks don't talk about: unintended consequences. At their last meeting, the "Fed" announced that it was keeping borrowing rates (or whatever they are called) at their current record low rates for the next two years, which for all practical purposes is zero percent. Until now, the "Fed" has always been vague about its intentions. That means for folks sitting on the fence, trying to make a decision to buy a new home, they can now procrastinate, knowing that rates may not change all that much over the next two years. Yes, I know the two rates are not directly connected; if home buying starts to pick up, mortgage rates can increase. But, in the big scheme of things, to be told that the "Fed" plans to keep rates this low for two years, folks will naturally procrastinate.

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On another note, the Obama administration has filed to block the proposed buyout of T-Mobile by ATT. This is really bad news for T-Mobile; great news for Verizon, and maybe Sprint; and so-so news for ATT. Common sense tells me that T-Mobile was ready to shut their operations down when they agreed to be bought out by ATT, and common sense tells me that psyscologcally, at least, that process has begun. Regardless, how many folks are signing up for T-Mobile not knowing who their new service provider might be. So, this is not good news for T-Mobile.

I'm not sure this is the worse news for ATT or its shareholders. This was going to be a huge chunk of change all at one time. Now, if the buyout is stopped by the Justice Department, the Verizon, ATT, and Sprint folks will simply divide the spoils as T-Mobile implodes from lack of growth. Obviously if the Justice Department nixes ATT, it should also nix Verizon buying T-Mobile, but it's always possible Sprint-T-Mobile will find a way to get together. I used to follow the various systems (e.g., CDMA) the different providers used, but have long given up on that. It turns out the providers have ways of making any combination work, it seems.