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INTRO
Currently ranked as the third-largest wireless carrier in the United States, T-Mobile U.S. Inc.’s history can be traced back to 1994 following the establishment of VoiceStream Wireless PCS as a subsidiary of Western Wireless Corporation. Founded by John W. Stanton, VoiceStream would spin off from the parent company on 3rd May 1999, and on 31st May 2001, get purchased by Deutsche Telekom for $ 35B. It was then renamed T-Mobile USA.
Today, Deutsche Telekom owns a 43% share of the company, while SoftBank Group, a Japanese Conglomerate owned a 24% share before selling around two-thirds of its shares in June 2020
As of the third quarter of 2020, T-Mobile U.S. Inc had 100m subscribers, up from 74m in 2018
ALL ROUND CARRIER
The company offers wireless services to wholesale, prepaid, and postpaid customers and mainly generates revenue by providing affordable communications services to these customers. T-Mobile U.S. Inc.’s products can be categorized into the following:
Mobile phone and data
Prepaid mobile phone and data
Television and streaming
Financial services
T-Mobile U.S. Inc. also provides services, devices, and accessories across its flagship brands, including Metro by T-Mobile, T-Mobile, and Sprint. The company also sells its devices to dealers and other third-party distributors for resale through independent outlets and third-party websites.
LEADING IN 5G THROUGH MASSIVE INVESTMENTS
T-Mobile U.S. Inc.’s main competitors are Verizon and AT&T. T-Mobile and Sprint completed their merger in 2020 and now have a 25% market share while AT&T has around 37% of the market and Verizon 27%. Going forward, the company is betting on its 5G lead and brand image to win market share.
The company is investing $ 40B into its 5G network and infrastructure, something that gives T-Mobile a significant competitive edge over its competitors
“T-Mobile beat out both Verizon and AT&T with its 5G network for availability, download, and uploads speeds. However, Verizon was able to come out on top for 5G video experiences.”
Currently, T-Mobile’s 5G infrastructure covers 6,000 cities and over 225m people across 1m square miles, more than any other provider in the United States
“Specifically when it came to 5G availability, T-Mobile users were able to use the latest-gen connection 30.1% of the time. AT&T users saw 5G coverage 18.8%, while Verizon customers had 5G just 9.5% of the time.” Michael Potuck for 9To5Mac
THE UNCARRIER
T-Mobile launched its bold marketing initiative “Uncarrier” in 2013. This aimed to focus the brand on simplicity, fairness and value. The goal, from the very beginning, was to rid T-Mobile’s top-level management of the exclusive image it had grown synonymous with over the years.
This meant putting the CEO out there, having him interact with both employees and customers, and communicate on a one-on-one basis with them to understand what they wanted
“Legere took the job in 2012. "On the very first day at T-Mobile, I remember sitting there, and as I was doing interviews I thought about this company becoming the complete opposite of the other carriers in this industry, becoming the 'Un-carrier,'"
The prove successful and added over 22m new customers to the service in the first 2 years
“He laid out a plan for how T-Mobile would reinvent itself and make waves in the industry. In his four years as CEO, Legere has taken T-Mobile US public, more than doubled its customer count, and overtaken Sprint as the third largest carrier in the country.” Richard Feloni for Business Insider
THE MARKET
The U.S. telecommunications market is set to grow by 6% year-on-year over the 2020 - 2025 period. Fuelled by growing investments by telecom operators into 5G deployment and the advent of 5G enabled phones at lower price points.
According to IBIS World, America’s telecommunications industry is currently valued at $ 279B. In 2021, the industry is expected to experience a decline of 0.8%, even though it has remained relatively steady between 2016 and 2021
It is projected that by 2025, the revenue earnings for the telecommunications industry will grow by 6%. This growth will be fueled by growing sales from both mobile and fixed broadband services
It is estimated that by 2025, the industry will generate $ 294B annually
According to GSMA, 5G is set to account for half of connections by 2025 as 51% of the 426m mobile connections will be running on 5G by 2025
The adoption of 5G networks will accelerate with continued investments in 5G networks and a growing range of 5G smartphones at lower price points
“The report confirms that operators in North America will continue to be among the world leaders when it comes to 5G deployment. Although the rate of 5G adoption was lower than originally anticipated due to the pandemic, we don’t expect it to impact the growth of connections in the long term.” Mats Granryd for GSMA
TIER-1 MANAGEMENT
T-Mobile U.S. Inc. is currently led by Mike Sievert who has worked at T-Mobile since 2012. He has held various positions such as Executive VP and Chief Marketing Officer, Chief Operating Officer, President, and Chief Operating Officer before becoming President and CEO of the company.
Mike Sievert is the current President and CEO of T-Mobile U.S. Inc., a position he has held since April 2020 after taking over from John Legere
Started as an Executive VP and Chief Marketing Officer, before being promoted to Chief Operating Officer in 2015, Director, Board of Directors in February of 2018, and then President and CEO in April of 2020. He also currently serves as Director, Board of Directors at Shaw Communications, and is the co-founder of Investor and Entrepreneur. In 2009-2011, Mike Sievert served as Chief Commercial Officer and Chairman of Operating Committee at Clearwire. From February 2008 to May 2010, he served as Director, Board of Directors at Switch and Data. He has also worked for various other companies, including Microsoft, AT&T, Rogers Communications, Procter & Gamble, along with IBM
Holds a Bachelor of Science in Economics, Marketing, and management from the University of Pennsylvania
Janice Kapner is the Executive Vice President and Chief Communications Officer at T-Mobile
Janice launched her career in marketing and PR for various Silicon Valley startups, assisting with an IPO and a major acquisition. Before joining the Un-carrier in 2013, she worked at Microsoft for 10 years, eventually serving as the head of worldwide communications for Microsoft Office
Graduated from California State University at Sacramento, where she earned a bachelor’s degree in communications with an emphasis in journalism, and she completed executive marketing programs through both Stanford University and Kellogg School of Management at Northwestern University
Peter Ewens is the Executive Vice President, Corporate Strategy and Development at T-Mobile
First joined the company back in 2008 as Senior Vice President of Corporate Strategy and has served as Vice President at OEM Group and was a principal at McKinsey & Company
Holds a B.A.Sc. in Engineering Science from the University of Toronto, an M.Sc. in Electrical Engineering from the University of Toronto, and an SM in Business Administration from MIT Sloan School of Management
RED FLAGS / FRAUD
Following the merger between T-Mobile and Sprint, T-Mobile was forced to pay a $ 200m fine as part of a settlement to resolve a probe into Sprint’s alleged abuses of a federal program aimed at low-income subscribers.
This came after an FCC audit revealed that Sprint, earlier in 2020, claimed monthly subsidies for 885,000 customers as part of the federal Lifeline program, even though these subscribers were not using the service.
Additionally, in 2020, T-Mobile was fined $ 92m by the FCC for the unauthorized sale of customers’ real-time location data to third parties
FINANCIAL REVIEW
T-Mobile U.S. Inc. posted total annual revenue of $ 68.4B for the year 2020 and $ 20.3B in the last quarter of the year, an increase from $ 11.9B in the last quarter of 2019
Net income for the last quarter stood at $ 750m, and $ 3.1B for the full year 2020, a decrease from $ 3.5B back in 2019
The company saw a postpaid net addition of 1.6m in the last quarter of 2020, and 5.5m for the entire year, the best in the industry
Postpaid phone net additions grew by 824,000 in the last quarter of 2020, and 2.2m for the entire year
Following the Sprint merger, T-Mobile managed to deliver $ 1.3B of synergies in the entire year of 2020
25% of Sprint postpaid customer traffic was moved to the T-Mobile network, with over 4m customer network migrations completed by the end of the year
It is projected that in the 2021 financial year, T-Mobile’s postpaid net customer additions will be between 4 and 4.7m. It is further projected that the core adjusted EBITDA will range between $ 22.6B and $ 23.1B
THE TAKE
What we like: T-Mobile is a fairly-valued and growing telecom operator with a strong lead in 5G. The company is pinning its growth on its unique brand image, simple offering and significant investments in 5G
What we don’t like: Following T-Mobile and Sprint’s merger, the company may not be able to grow through acquisitions
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Disclaimer: Return is not an investment advisor, we have no access to non-public information about publicly traded companies, and this is not a place for the giving or receiving of financial advice, advice concerning investment decisions or tax or legal advice. We are not regulated by the Financial Services Authority. Investors should conduct their own analysis before making any investment. The value of shares, assets and investments and the income derived from them can decrease as well as increase. Investors may not get back the amount they invested - there is a real risk of partial or total loss. Past performance is not a guide to future performance.
Disclosures: The author has a position in T-Mobile U.S. The author has no business relationship with any company mentioned in this article and the author is not receiving any form of compensation for this article.
Picture: Courtesy of T-Mobile U.S.