T-Mobile US (TMUS, Financial) is fast catching up with its closest rival Sprint Corp (S, Financial) and may soon break into the top three of the mobile space, alongside bigger players AT&T Inc. (T, Financial) and Verizon Communications Inc. (VZ, Financial). In terms of the stock market, T-Mobile has performed better than all its three bigger rivals, be it over the last one month, last three months or even a 52-week period. Can the company be expected to outperform its bigger rivals in the months to come, or are there indications that it will lose steam? Even if the news is mostly good, the stock currently trades very close to its all-time high mark, so is this a good time to buy T-Mobile?
Subscriber growth
T-Mobile has managed an enviable track record of adding more than a million customers to its network every quarter for the last eight consecutive quarters, and at the end of the last quarter, during which added another 1.8 million new customers, its total subscriber base stood at 56.8 million, which is tantalisingly close to Sprint’s 57.1 million at the same time. Whether T-Mobile will actually beat Sprint to the number three spot in the next quarter, or some other time, remains to be seen. The company’s churn rate for the last quarter was a very impressive 1.3%, its best so far, against the industry average of 1.93% for the last quarter. It shows that T-Mobile’s customers are happy with the service they are getting and are staying with the company, making the customer base high quality.
Wooing business customers
The disruptive and simplified pricing plans offered by T-Mobile has been rolled out for small and medium sized businesses, and this new focus area should pay rich dividends to the company, since smaller sized businesses consider cost of service a significant factor. And with offerings of business lines for as low as $10 or $15 a month, it is sure to take away at least some potential business from the bigger players. This looks even more plausible if we consider the new tie-up T-Mobile has made with smartphone-maker BlackBerry Ltd (BBRY, Financial). It enables T-Mobile to sell BlackBerry Classic devices to enterprise customers with financing and no upfront payment, along with a whole host of business productivity and security solutions.
Other factors
When the company announced its results for the last quarter in April, it beat analysts’ estimates in both revenue and earnings. It looks likely that, given the momentum of its added subscribers and low churn, a healthy financial picture should continue as well.
Along with Sprint, T-Mobile has partnered with Google Inc. (GOOG, Financial) for its Project Fi, the latter’s entry into the wireless service market. While this may or may not have much of an impact on T-Mobile’s revenues or profits in the medium to long term, it is good for market sentiment.
The company is also continually investing to improve its network, and is now the second largest player, in terms of activity. Its LTE network has improved vastly in recent times and rates highly in urban areas particularly.
Conclusion
There is very little reason to keep away from the T-Mobile stock. The company has been performing well quarter after quarter, its stock has outperformed peers and the management seems to be on the right track too. Since the stock trades near its all-time high, we would advise to BUY on the first dip below $33.50.
