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T-Mobile Fined for False Ring Tones on Rural U.S. Calls


T-Mobile US, Inc. TMUS has agreed to pay a fine of $40 million to the U.S. Treasury to resolve a dispute with the government. The company was accused of failing to fix problems relating to phone calls in rural areas and using false ring tones, which were banned, to give the impression that the faulty calls were actually getting through.

T-Mobile accepted the charges and acknowledged that false ring tones were used on hundreds of millions of long-distance rural calls in violation of Federal Communications Commission (“FCC”) rules. The FCC announced the fine after an investigation, which showed that the company was involved in the practice of injecting false ring tones into calls.

The FCC order did not disclose if any of the hundreds of millions of calls with false ring tones were actually completed. It opened the investigation after callers were unable to reach consumers served by three rural carriers in Wisconsin, although T-Mobile acknowledged that the issue was resolved.

The T-Mobile's fine was the sixth settlement related to rural connectivity. In 2015, Verizon Communications Inc. VZ had paid $5 million to address similar issues.

Moving ahead, T-mobile said that it remains committed to all customers across the country as the ringtone oversight was unintentional. The carrier’s network remains the fastest in America both in download and upload speeds.

The incident, however, has impaired the credibility of the company to some extent. Over the last three months, shares of T-Mobile have outperformed the industry with an average loss of 0.3% compared with a decline of 3.2% for the latter.

T-Mobile carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the industry are United States Cellular Corporation USM, sporting a Zacks Rank #1 (Strong Buy) and SITO Mobile, Ltd. SITO, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United States Cellular has an expected long-term earnings growth rate of 1%. It exceeded earnings estimates in each of the trailing four quarters, with an average of 306.5%.

SITO Mobile has an expected long-term earnings growth rate of 25%.

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