Select Multiples of T-Mobile and Some of Its Peers



Scale among US mobile players

In the earlier parts of the series, we looked at some updates from T-Mobile (TMUS) during the UBS Global Media and Communications Conference held on December 7, 2015. Here, let’s look at the earning multiples and EV (enterprise value) of T-Mobile and some of its peers in the US wireless telecom space. Note that the top four US mobile carriers are AT&T (T), Verizon (VZ), T-Mobile, and Sprint (S). Let’s start with the scale of operations of T-Mobile among these players.

[marketrealist-chart id=886009]

Note that AT&T and Verizon also have significant wireline operations. However, the wireline operations of Sprint are relatively small compared to its wireless component.

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As we can see in the graph above, AT&T is the largest telecom company as of December 10, 2015, in the United States by EV. The second largest in this metric is Verizon. Meanwhile, among the top four US mobile players, T-Mobile was the third largest by EV. Finally, Sprint’s EV was lower than that of T-Mobile as of the same date.

Earnings multiples

Now let’s look at earnings multiples of T-Mobile and peers as of December 10, 2015, namely the forward PE (price-to-earnings ratio) and forward five-year PEG (PE-to-growth ratio) of these players.

As of December 10, 2015, T-Mobile had a forward PE of around 18.9x and forward five-year PEG of 0.7x. Meanwhile, comparable PE and PEG metrics of AT&T were around 11.9x and 2.1x. For Verizon, the forward PE was 11.4x and forward five-year PEG was 1.5x as of the same date.

You may consider taking a diversified exposure to T-Mobile by investing in the Vanguard Telecommunication Services ETF (VOX). The ETF had about 3.7% of its holdings in the US wireless telecom company at the end of October 2015.


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