T-Mobile US Inc. (TMUS, Financial) offers the highest growth potential among U.S. wireless companies for 2017, edging out several competitors: Verizon Communications Inc. (VZ, Financial), AT&T Inc. (T, Financial) and Sprint Corp. (S, Financial). The Washington-based telecom company had consistent customer growth over the past three years, resulting in higher short-term profitability.
T-Mobile tops competition in wireless customer growth over four-year period
The wireless industry reports two key performance values: total wireless customers and postpaid churn. The following comparative analysis looks at the sequential quarter percent change in total wireless customers to determine which company offers the strongest competitive model over the past four years. Figure 1 summarizes the sequential percent change of customers for each of the four companies.
Figure 1
T-Mobile has averaged 3.48% quarterly customer growth over the past three years while the other three companies average less than 2%. The company added 1 million customers every quarter for the past four years according to its first-quarter 2017 earnings report. CEO John Legere commented on the company’s fourth year as a public company with “another incredible quarter,” highlighted by “recent success in the 600 MHz spectrum auction” and continued success in its “winning Un-carrier formula.” For the past 10 years, T-Mobile has maintained good gross margins due to the company’s consumer-friendly business model.
Company has healthy postpaid churn rates
Lower postpaid churn rates suggest higher growth potential as the churn rate measures the percent of customers that switch to a different wireless network during a specific time period. Even though T-Mobile has the second-highest churn rate among the companies, these churn rates have generally decreased since 2013, which in turn resulted in increasing operating margins. On the other hand, the churn rates for AT&T and Verizon have increased, implying a loss of postpaid customers.
Figure 2 summarizes the postpaid churn rates for the four companies over the past four years.
Figure 2
T-Mobile offers strong financial outlook for 2017
T-Mobile has a Piotroski F-score of 7, suggesting a strong business operation. According to the earnings report, company management increased its expected branded postpaid net customer additions by approximately 0.4 million. The report also mentions expected increases to T-Mobile’s 4G LTE coverage to over 321 million people and further deployment of its 700 MHz A-Block spectrum.
As the company gave a solid financial outlook, T-Mobile’s share price rose to $67.35 per share April 25. The company’s stock currently trades around $67.93.
Disclosure: All values on the number of wireless customers and postpaid churn rates come from the companies’ quarterly earnings report filings. The author has no positions in the stocks mentioned.
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