T-Mobile’s Value Proposition in the US Wireless Space



T-Mobile’s scale

Previously in this series, we looked at some aspects of T-Mobile’s (TMUS) performance in 1Q16. The carrier reported the results for the quarter on April 26, 2016.

In this part, let’s see some value-centric parameters of the telecom player among peers in the US. Let’s start with the scale of the top four mobile players in the US: Verizon (VZ), AT&T (T), T-Mobile, and Sprint (S).

As of April 27, 2016, AT&T was the second-largest global telecom player by market capitalization. Verizon was the second-largest major player in this metric in the US. Both Verizon and AT&T also have significant wireline operations.

As of April 27, 2016, among the top four US wireless carriers, T-Mobile was the third-largest carrier by market capitalization. Sprint had a lower market capitalization figure than that of T-Mobile on the same day.

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T-Mobile’s valuation multiple

Now let’s look at the valuation multiples of the top four US mobile players. T-Mobile’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) metric was ~5.5x as of April 27, 2016. This multiple was larger than that of Sprint at ~4.9x on the same date. Meanwhile, the integrated US telecom giants Verizon and AT&T had similar EV-to-EBITDA metrics of ~6.9x and ~6.5x, respectively, on April 27, 2016.

Instead of taking direct exposures to the stocks of players in the US telecom industry, you may consider a more broad-based exposure to this industry space by investing in the SPDR S&P 500 ETF (SPY). SPY held a total of ~2.8% in some of the US telecom companies at the end of March 2016.


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