Can T-Mo Handle Uncarrier 8.0?

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John Legere announced T-Mobile’s last move, Uncarrier 8.0, yesterday morning. This will automatically roll over customers’ unused data into a personal Data Stash that can be used for up to a year. “Can you imagine your gas station siphoning unused gas from your car each month? The US wireless industry is even worse,” said Legere. “Americans have been gamed by the carriers into buying huge data plans – all to avoid getting screwed with overage penalties. Only to find out they bought more than they need which is then confiscated by the carrier. For the consumer it’s lose, lose. That data is rightfully yours,” added Legere. “And, we’re putting an end to this appalling industry practice today. With Data Stash, when you buy additional high-speed data, there’s no need to lose what you don’t use.” Offering up all of this additional data, one might wonder if the T-Mobile network is capable of handing it. According to Mike Dano at Fierce Wireless, in a recent investor note from analysts at Macquarie Capital citing a meeting with T-Mobile CTO Neville Ray, the firm wrote that “T-Mo has several years of additional capacity on existing spectrum and current growth rates.”

Jennifer Fritzsche, Senior Analyst at Wells Fargo, explained the firm’s take on T-Mobile’s latest announcement, “While we give credit to TMUS for the continued uniqueness of its offering and acknowledge it’s another headline to rattle the industry, at the heart of this offering, we believe, is essentially what Sprint is already doing with Unlimited data. In our view, Sprint’s message is a lot easier and less confusing to potential customers. In regard to the two largest carriers and impact on them, a case could be made that T and VZ have already gotten ahead of this move by offering greater data in each of their buckets.” 

Fitzsche explains, “Last, we note that – unlike the other three national wireless operators – there is no pooling of data in the TMUS family plans. Therefore, in a family of 4 each user has their own data. This is an important point to consider and is a disadvantage for TMUS, in our view. For example, if there is one heavy data user – this user cannot tap into the lower data users’ data bucket. We believe this is a key differentiation that is somewhat unappreciated by the marketplace.”

The Wall Street Journal recently wrote that “T-Mobile’s valuation is out of whack.” “The government’s auction, which kicked off last month, would broadly value all of T-Mobile’s spectrum at 31% more than T-Mobile’s current enterprise value,” according to The Wall Street Journal. “MoffettNathanson analyst Craig Moffett thinks that is one of several reasons that investors should buy T-Mobile shares. He calls the mobile carrier “an undervalued and underappreciated growth story. The U.S. government’s spectrum auction, the first since 2008, spooked investors in the wireless industry because the steep prices commanded for the spectrum showed that carriers will have to pay a high price to handle the ever-increasing data from their customers’ smartphones. T-Mobile and other carriers are expected to participate in another auction in 2016 and the company could be forced to spend $10 billion then based on current prices, Mr. Moffett said.”

Still, Mr. Moffett thinks T-Mobile has been oversold. “It’s got by far the lowest multiple in the industry despite what is far and away the industry’s best growth prospects.” (WSJ)

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