VALUATION HIGHLIGHTS

1. Postpaid Mobile Plans & Phones constitute 71% of the Trefis price estimate for T-Mobile's stock.
2. Wholesale and Other constitutes 16% 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?

Q3 2023 Results

T-Mobile posted a mixed set of Q3 FY'23 results. While earnings beat estimates, coming in at $2 per share, revenues contracted by 1% to $19.25 billion. However, the company raised its postpaid net customer additions to between 5.7 million and 5.9 million, an increase from prior guidance of 5.6 million to 5.9 million.

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.

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.