T-Mobile (TMUS) posted another quarter of solid financial results last week after pre-announcing its customer metrics in January, according to Wells Fargo Senior Analyst, Jennifer Fritzsche. “Service revenue growth was relatively stable at +6.3 percent yr/yr growth,” Fritzsche reported, “boosted by TMUS’s +1.0MM postpaid phone customer additions. TMUS was also able to grow its cash EBITDA margins (Excluding leasing revenues) by 150 bps yr/yr despite a highly competitive quarter.”
The main focus for TMUS remains the looming Sprint merger decision and Fritzsche said management reiterated its confidence in the regulatory process. “Even if the S merger is not approved,” she said, “TMUS continues to have a very favorable standalone position.” She noted the TMUS CEO said: “if there is a need for an amendment…including possibly a price, we would handle that very swiftly after the deal was approved.”
Craig Moffett of MoffettNathanson said it has come to be conventional wisdom that T-Mobile will be fine whether the Sprint deal closes or not. “If the deal closes,” Moffett said, “they get a trove of 2.5 GHz spectrum and synergies galore. If it doesn’t, well, they’ve still got the industry’s best growth story, with a host of geographies and market segments where they under-index.”
Conventional wisdom isn’t always wrong however, according to Moffett. “We’ve maintained the nearly nine-year-long Buy rating (save for one brief hiatus in 2017) precisely because we believe in that heads-I-win, tails-I-win narrative. T-Mobile has a growth story to tell in newly opened rural markets, and in an under-indexed SMB segment, and they have a strong network story,” he said.