T-Mobile (TMUS) Last Update 1/29/24
Related: CMCSA T VZ
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
T-Mobile
STOCK PRICE
DIVISION
% of STOCK PRICE
Postpaid Mobile Plans &...
72.3%
$188
Wholesale and Other
14.4%
$37
Prepaid Mobile Plans & Phones
13.4%
$35
Net Debt
32.3% $84
TOTAL
100%
$260
$175.88
Yours
Trefis Price
N/A
$161
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis

Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

T-Mobile Company

VALUATION HIGHLIGHTS

  1. Postpaid Mobile Plans & Phones constitute 72% of the Trefis price estimate for T-Mobile's stock.
  2. Wholesale and Other constitutes 14% of the Trefis price estimate for T-Mobile's stock.
  3. Prepaid Mobile Plans & Phones constitute 13% of the Trefis price estimate for T-Mobile's stock.

WHAT HAS CHANGED?

Q4 2023 Results

T-Mobile posted a mixed set of Q4 FY'23 results. Revenues came in ahead of estimates at $20.48 billion, with service revenue rising 3% driven by strong subscriber adds. While net income rose 36% to $2.0 billion, it fells short of estimates.

Acquisition of MVNOs

T-Mobile has acquired Ka'ena Corporation, a company that owns budget wireless mobile virtual network operators Mint Mobile and Ultra Mobile. The deal is likely to enable T-Mobile to bring in more budget-conscious customers via online channels. Moreover, since both carriers operate on top of the T-Mobile network, there could be some cost savings as well.

Sprint merger synergies will drive profits

While earnings in recent quarters have been impacted by a costly integration of Sprint's wireless network with T-Mobile's following their 2020 merger, T-Mobile will benefit meaningfully as synergies from the deal are realized. The decommissioning of Sprint's legacy network, which was largely complete in 2022, should help the company realize synergies to the tune of $7.2 to $7.5 billion for 2023.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of T-Mobile's value that present opportunities for upside or downside to the current Trefis price estimate:

Significant improvement in network performance

Network quality and pricing remain the biggest differentiating factors in the wireless business. While T-Mobile was a laggard of sorts in terms of network coverage and speeds, this has changed with the company's growing low-band spectrum interests and wide 5G coverage.

  • Increasing Postpaid ARPU and Service EBITDA Margins: If T-Mobile's network improvements enable it to bolster its pricing power, increasing its Postpaid ARPU to about $60 by 2029, versus our current estimate of about $54 while improving Service EBITDA margins to about 65% versus our current estimate of about 61%, there could be a 15% upside to our current price estimate.

  • Improving Postpaid Subscriber Base: Alternatively, T-Mobile could also maintain its value pricing proposition while offering a strong network performance, leading to an influx of customers. Under this scenario, if the carrier can boost its postpaid subscriber base to about 90 million subscribers, up from our current 2029 estimate of 78 million subscribers, there could be a 10% upside to our price estimate.

    • For additional details, select a driver above or a division from the interactive Trefis split for T-Mobile at the top of the page.

    BUSINESS SUMMARY

    T-Mobile US is the second-largest wireless communications services provider in the United States, providing voice, messaging, and data in the postpaid, prepaid, and wholesale markets. The company had over 110 million subscribers as of the end of Q3 2022. T-Mobile acquired smaller rival Sprint in April 2020.

    SOURCES OF VALUE

    We estimate that the Postpaid Mobile Plans & Phones segment is more valuable than the Prepaid Mobile Plans & Phones segment due to:

    Larger postpaid customer base

    T-Mobile had close to 73 million postpaid phone subscribers as of early 2023, compared to about 21 million prepaid subscribers. Moreover, the postpaid mobile market in the United States is significantly larger than the prepaid phone market, with postpaid plans accounting for roughly 4 out of 5 wireless phone connections in the country.

    Higher ARPU and lower churn

    Monthly ARPUs for T-Mobile's postpaid users are higher compared to ARPUs for its prepaid users, on account of higher data and voice usage. Moreover, postpaid users are more loyal, leading to lower churn rates. This translates to lower customer retention expenses and better margins.

    KEY TRENDS

    T-Mobile 5G lead is helping it add subscribers

    T-Mobile presently has the best 5G network coverage among U.S. carriers. As of December 2022, the carrier's extended range 5G network covered 323 million people, leveraging the company's far-reaching 600 MHz spectrum holdings. The carrier's higher speed “ultra capacity 5G service also now covers 260 million people. The strong 5G network is helping T-Mobile win over more customers, improve its pricing power, and help to better retain existing subscribers.

    T-Mobile's entry into the fixed wireless market

    T-Mobile is emerging as a strong player in the fixed wireless market, with its Home Internet offering that leverages its 5G network. The service has already garnered over 2 million customers as of December 2022. The service is more affordable versus competing offerings, priced at about $50 per month when customers sign up for automatic payment.