What Is T-Mobile’s Scale in the Telecom Space?



T-Mobile’s scale

In this part of the series, we’ll look at some value-centric measures for T-Mobile (TMUS) compared to other 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 (TMUS), and Sprint (S).

As of May 10, 2017, AT&T was the largest US telecom player, Verizon was the second-largest, and T-Mobile was the third-largest by market capitalization. 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. Multiples based on enterprise value help us understand the value of a company through its sources of capital from the shareholder’s 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 as of May 10, 2017. T-Mobile was trading at a forward PE (price-to-earnings) multiple of ~26.2x, which was more Verizon’s and AT&T’s at ~12.1x and ~13.0x, respectively.

T-Mobile’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) metric was ~6.8x, which was higher than Sprint’s at ~5.5x. Integrated US telecom (telecommunication) giants Verizon and AT&T had similar EV-to-EBITDA metrics of ~6.68x and ~6.66x, respectively.

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


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