Rural wireless shares up after AT&T-Dobson deal

NEW YORK (Reuters) - Shares of rural wireless providers such as Centennial Communications Corp CYCL.O, Rural Cellular RCCC.O and SunCom Wireless SCWH.OB rose on Monday on acquisition speculation after AT&T Inc. (T.N) agreed to buy small wireless provider Dobson Communications DCEL.O.

SunCom stock was up 13.5 percent over the counter, while Centennial rose 8.5 percent and Rural Cellular shares were up 5 percent on Nasdaq after AT&T said late Friday it would buy Dobson for $2.8 billion, or $13 per share in cash.

Shares of U.S. Cellular USM.A rose 2 percent on the American Stock Exchange as investors bet it too could be part of the current wave of telecommunications mergers and acquisitions.

"They're certainly up because of M&A speculation ... Rural Cellular and SunCom are the ones that are up the most on acquisition speculation," said Stanford Group analyst Michael Nelson.

But despite the share increases, analysts said they were not convinced any deals were forthcoming in the short term.

Raymond James analyst Ric Prentiss said he does not expect a Centennial deal, but his upgrade of the stock to "outperform from a "market perform" rating helped boost the shares.

"While we do not believe Centennial is ripe for acquisition at this point, we feel the company has very attractive assets and is reaching a turning point operationally," he said in a note to clients.

The most logical buyer for SunCom is Deutsche Telekom AG's (DTEGn.DE) T-Mobile USA, according to Nelson. But he said T-Mobile was more concerned with upgrading its own network for high-speed data services than buying rural providers.

Analysts also said that Rural Cellular and U.S. Cellular were expensive relative to Dobson's buyout price.

"I'd be surprised if any of the players get sold at prices higher than they're trading at today," said SurTerre Research analyst Todd Rethemeier.

Rethemeier calculated Dobson's agreed purchase price at 9.4 times his estimate for the company's 2008 earnings before interest, tax, depreciation and amortization (EBITDA).

By comparison, his rough estimates show U.S. Cellular trading at 8 times 2008 EBITDA and Rural Cellular trading at 10 times his 2008 EBITDA estimate.

Rethemeier said he was also surprised at the price AT&T paid for Dobson, which he had valued at $7 a share.

"I thought the timing of the Dobson deal was interesting," said Rethemeier, who had a sell rating on the stock.

"If you're going to overpay for an acquisition and destroy $1.2 billion in shareholder value its good to do it on the weekend everyone's focused on the iPhone," said Rethemeier, referring to Friday's much-hyped launch of the iPhone for which AT&T is the exclusive service provider.

(Reporting by Sinead Carew)