Cogent Relieves T-Mobile of Its Wireline Business and Can Find Value Where T-Mobile Didn’t

Cogent has agreed to take T-Mobile’s money-losing wireline business off its hands in a complex transaction. While the acquired business is in rapid decline, we believe the acquisition can be a good deal for Cogent for two main reasons. First, Cogent has the structure and desire to support the services this business entails, whereas T-Mobile does not actively participate in these markets—it inherited the business from Sprint. We expect significant cost synergies and new sales opportunities as a result. Second, Cogent receives ownership of a substantial fiber network to support its existing business and mitigate some of the risk we believe is associated with the network leases it relies on. Cogent expects the deal to boost EBITDA and cash flow and to close by the end of 2023, but we’d like clearer details about the long-term obligations before proclaiming this deal a win. With the information we have, we are maintaining our $65 Cogent fair value estimate.