Earlier in this series, we looked at some updates for T-Mobile (TMUS) from the recent MoffettNathanson Media & Communications Summit. Now, let’s look at some value-centric measures of the company compared to its peers in the United States.
As of May 23, 2016, AT&T was the largest global telecommunications player by market capitalization. Verizon was the second-largest major player. Note that both Verizon and AT&T both have significant wireline operations.
As of May 23, among the top four US wireless carriers, T-Mobile was the third-largest by market capitalization. As you can see in the above chart, Sprint had the lowest market capitalization as of the same date.
T-Mobile’s enterprise value multiples
Now, let’s move on to the enterprise value (or EV) multiples of the top four US wireless players. T-Mobile’s current year EV-to-EBITDA (earnings before interest, tax, depreciation, and amortization) was ~5.9x as of May 23, 2016. This multiple was higher than Sprint’s ~4.6x as of the same date.
Integrated US telecom players Verizon and AT&T had similar EV-to-EBITDA metrics of ~6.7x and ~6.6x, respectively, on May 23.
Instead of taking direct exposure to T-Mobile’s stock, you may want to take diversified exposure to the company by investing in the PowerShares QQQ Trust, Series 1 ETF (QQQ). QQQ held ~0.6% in TMUS at the end of April 2016.