T-Mobile (TMUS) Last Update 5/8/24
Related: CMCSA T VZ
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
T-Mobile
$176.61
Yours
Trefis Price
N/A
$184
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?

Q1 2024 Results

T-Mobile posted a mixed set of Q1 2024 results. Revenues came in below estimates at $19.59 billion, roughly flat versus last year, on account of lower equipment sales. Earnings stood at $2 per share, ahead of estimates. T-Mobile also raised its full-year guidance, noting that postpaid net customer additions are expected to be between 5.2 million and 5.6 million, an increase from its prior guidance of 5 million to 5.5 million.

T-Mobile's Broadband push

T-Mobile has also made steady inroads into the broadband market with its fixed wireless broadband offering, using the excess spectrum it acquired via the Sprint deal. As of Q1 2024, its total wireless broadband base stood at about 5 million customers. The carrier also intends to expand into the wired broadband space, partnering with private equity firm EQT to buy Lumos, a fiber network operator in the Mid-Atlantic.

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.

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 than ARPUs for its prepaid users due to 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. Also, the carrier's higher-speed Ultra Capacity 5G (5G UC) service now covers 260 million people. The strong 5G network is helping T-Mobile win over more customers, improve its pricing power, and help retain existing subscribers better.

    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 leveraging 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.