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T-Mobile US Inc TMUS

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T-Mobile Posts Solid, if Messy, Q2 Results Amid the Pandemic and Sprint Integration

Analyst Note

| Michael Hodel, CFA |

Though the Sprint integration and pandemic made for messy results, T-Mobile appears to have performed well during the second quarter. The firm added 253,000 net postpaid phone customers during the quarter, somewhat better than either Verizon or AT&T, but the carriers are treating nonpaying customers who remain connected under the FCC’s "Keep Americans Connected" pledge differently. Management’s outlook for the remainder of 2020 lines up reasonably well with our expectations, except for forecast net postpaid customer growth. It seems the firm expects to retain more Sprint customers than we had assumed, though it also wrote down the Sprint customer base far more than we expected as part of bringing the two firms’ accounting policies into alignment. At this point, we don’t expect to materially change our $89 fair value estimate and we view the shares as modestly overvalued.

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Company Profile

Business Description

Deutsche Telekom merged its T-Mobile USA unit with prepaid specialist MetroPCS in 2013, creating T-Mobile US. Following the merger, the firm provided nationwide service in major markets but spottier coverage elsewhere. T-Mobile has spent aggressively on low-frequency spectrum, well suited to broad coverage, and has substantially expanded its geographic footprint. This expansion, coupled with aggressive marketing and innovative offerings, has produced rapid customer growth. The firm serves 40 million postpaid and 21 million prepaid phone customers, equal to about 20% of the retail wireless market. T-Mobile is the third- largest carrier in the U.S., trailing AT&T and Verizon, though it will roughly match AT&T's size with the acquisition of Sprint.

12920 SE 38th Street
Bellevue, WA, 98006-1350
T +1 425 378-4000
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2019
Stock Type Classic Growth
Employees 53,000