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A Look at T-Mobile’s Value Proposition in the US Telecom Market

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T-Mobile’s scale

In this part of the series, we’ll look at some value-centric measures for T-Mobile (TMUS) among the major companies in the US wireless space. Let’s start with the size of the top four US wireless carriers: Verizon (VZ), AT&T (T), T-Mobile, and Sprint (S).

On January 25, 2017, AT&T was the largest US telecom player, Verizon was the second-largest player, and T-Mobile was the third-largest player by market capitalization. Also, Sprint’s market capitalization remained lower than T-Mobile’s.

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T-Mobile’s valuation multiples

Price-based multiples take into account value from a shareholder’s perspective. EV-based[1. enterprise value] multiples help investors understand the value of a company via its sources of capital from the shareholders’ point of view. These are forward multiples based on expected values after a year.

Let’s look at the earnings multiples for T-Mobile and its peers on January 25, 2017. T-Mobile was trading at a forward PE (price-to-earnings) multiple of ~33.3x, which was more than that of Verizon and AT&T at ~12.4x and ~13.5x, respectively.

T-Mobile’s forward EV-to-EBITDA[2. enterprise value to earnings before interest, tax, depreciation, and amortization] metric was ~6.9x, which was larger than Sprint’s ~6.3x. Meanwhile, the integrated US telecom giants Verizon and AT&T had similar EV-to-EBITDA metrics of ~6.7x.

In the next article of this series, we’ll look at analysts’ recommendations for T-Mobile stock.

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