On Sep 19, 2016, we issued an updated research report on U.S. wireless carrier T-Mobile US Inc. TMUS. The company has been witnessing robust customer addition recently, particularly in the branded postpaid segment.
T-Mobile US' wireless service business model relies on its “Un-Carrier” value proposition and strategic marketing efforts. Owing to the success of Un-carrier initiatives and aggressive promotional activities, the company continues to gain postpaid wireless customers. Management has raised the subscriber expansion outlook for 2016 based on this performance. Moreover, persistent launch of low-priced service plans should lure subscribers away T-Mobile US' competitors, including Verizon Communications Inc. VZ, AT&T Inc. T and Sprint Corp. S.
Further, T-Mobile US unveiled an attractive plan that allows owners of the iPhone 6 and 6s to exchange their devices for the new iPhone 7 under a new contract with no upfront fee. This has resulted in massive iPhone 7 and iPhone 7 Plus sales, along with the gain of new subscribers at the company.
While the top line and subscriber growth remain solid, T-Mobile is yet to see an improvement in its bottom-line numbers. Notably, costs incurred to gain customers and increase revenues have not rewarded shareholders yet. Additionally, the U.S. wireless market is highly competitive and almost saturated. Such intense competition could limit the company’s ability to attract and retain customers, which in turn would adversely affect its results. Also, success in the wireless service business largely depends on technical superiority, quality of services and scalability, representing areas in which T-Mobile US is yet to match with Verizon and AT&T.
T-Mobile US currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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