t-mobile us inc. full report
TRANSCRIPT
Year 2015 2016E 2017E
P/E 39.58 37.38 30.54
PEG 9.40 1.90 1.50
P/Sales 0.99 1.27 1.16
P/FCF 46.09 28.29 16.61
P/Book 1.93 2.60 2.56
December 11, 2016
T-MOBILE US INC - (TMUS) “Yeah, I Could Hear You the Entire Time”
OUSEMG EQUITYRESEARCH 1
Investment Thesis
T-Mobile US, Inc., offers voice, messaging, and data services in the postpaid, prepaid, and wholesale markets for customers and businesses in the United States, Puerto Rico, and the U.S. Virgin Islands.
Thesis Highlights
Growing LTE Demand in a Growing Data Market Overall mobile subscriptions are expected to increase from 7.3 billion in 2015 to over 9 billion by 2021, 4.3 billion of which are expected to be LTE based subscriptions. This is the effects of a shift to more advanced technologies in developed markets such as Western Europe and North America.
Branded Segments Outperform With Help From Initiatives TMUS provides wireless communication services to three primary categories of customers: branded postpaid, branded prepaid, and wholesale. Due largely in part to its aggressive pricing model and the success of MetroPCS, T-Mobile is the only wireless company with positive net growth in both postpaid and prepaid. For Q3 the postpaid segment of TMUS saw 890,000 net adds versus –185,000 for T, 86,000 for VZ and 173,000 for sprint. Likewise, its prepaid segment saw growth of 8 percent in both revenue and customer base YOY in 2015.
Network Investment and Expansion TMUS has been investing significantly over the years to enhance its network and provide faster high-bandwidth mobile communications services. During FY2014 and FY2015, the company’s capital expenditures for property and equipment related to network modernization and expansion were $4.5 billion and $4.3 billion respectively. And for 2016, that number is expected be in the $4.5 billion to $4.8 billion range. TMUS is also focused on expanding network coverage through an aggressive spectrum acquisition strategy with multiple acquisitions in 2014, 2015, and 2016.
Thesis Risks
Net Neutrality Net neutrality has become an increasingly common buzzword during the last decade, as digital privacy and service quality issues move into public view. Pricing plans and data speed have been the main concern for firms in this industry, as changes in federal regulation could drastically affect the viability of current revenue streams, in addition to creating new challenges for existing business models. Management has outlined these new regulations as a significant risk that has yet to fully play out. Combined with recent rulings from the FCC in February and June, many of these worst cases scenario risks have been confirmed.
Stock Rating: Buy
Price Target
Current Price
$66.05 (16.4%)
$56.74
Relevant Information
ROE 8.03%
EV/EBITDA 7.55
Current Ratio 1.67
Short Interest 5.96%
Dividend Yield 0.00%
Debt Rating BB
Next Earnings Date 02/22/2017
Analysts Mozika Maloba Head Analyst
Peter Rousseau Junior Analyst
Brad Morrissey Junior Analyst
Collin Patterson Analyst
Nick Gilkey Analyst
Company Information
Sector Communications
Industry Telecom
Market Cap $46.75B
Sales $35.31B
Beta 0.78
Price-Based Multiples
$30
$35
$40
$45
$50
$55
$60
9-Dec 9-Mar 9-Jun 9-Sep
One Year Price History (w/ 50-day Moving Average)
S&P 500 50d EMA TMUS
OUSEMG EQUITYRESEARCH 2
DECEMBER 11, 2016 | T-MOBILE US INC. (TMUS)
Thesis Point 1:
▪ Opportunity For LTE Market Capitalization
Growing LTE Demand in a Growing Data Market
Opportunity For LTE Market Capitalization
TMUS has a large opportunity to capitalize on the growing demand for LTE/4G Technology. Overall mobile subscriptions are expected to increase from 7.3 billion in 2015 to over 9 billion in 2021. Of the total mobile subscriptions, LTE based subscriptions are estimated to be over 4.3 billion by 2021. The shift is mainly due to substantial migration to more advanced technologies including WCDMA/HSPA and LTE in developed markets such as Western Europe and North America. Specifically in North America, overall mobile subscriptions look to sustain a LSD CAGR through 2021. Substantial growth, however, will be seen in Data Traffic and Total Mobile Traffic, stemming from an increase use of the smartphone for streaming and Internet browsing.
As the consumer trends are examined, they tend to favor TMUS. For example, only 23 percent of U.S. consumers have an unlimited data plan; yet the monthly mobile phone data allowance plans held by domestic customers are shifting to higher GB plans as data traffic increases. In addition, in an Ericsson analysis, “network measurements on LTE networks showed significant opportunities for improvement in cell-edge performance in the U.S.”, essentially meaning that LTE has displayed speeds that are still below expectations with regards to collaboration services and HD video viewing. Deloitte supports the Mobile Traffic growth thesis, noting that 72 percent of 18-24 year olds use their mobile phones while watching TV/a film (as well as 74 percent of 25-34 year olds), while in the older demographics that percentage drops down to 30-40.
U.S. and Canada Mobile Projections
2015 2021 CAGR 2015-
Mobile Subscriptions (million) 390 450 2%
Smartphone Subscriptions (million) 280 370 5% Data Traffic per active smartphone (GB/
month) 3.8 22 35% Total Mobile Traffic (EB/month) 1.3 8.5 35%
OUSEMG EQUITYRESEARCH 3
DECEMBER 11, 2016 | T-MOBILE US INC. (TMUS)
Branded Segments Outperform With Help From Initiatives
Branded Segments Impressive Performance
T-Mobile’s branded operating segments have significantly outperformed competitors over roughly the last three years. The postpaid segment which accounts for 51 percent of revenue saw a 13.8 percent increase in revenue in FY15 while the growing prepaid segment accounting for 24 percent of revenue increased revenue by ~8 percent.
Management announced on September 20th QTD postpaid net phone adds of 753k with estimates around 814k for the quarter. This compares to leading competitors S, VZ and T registering roughly 173k, 86k and -185k respectively. Since the second quarter of 2013 when TMUS began adding postpaid phone subscriptions, they have captured 90 percent of growth in the industry. Managements release of QTD performance for prepaid in September net phone adds was 650k with a full quarter estimate of 715k.
The main focus for the prepaid segment has been on the Metro PCS brand. Management continues to leverage the recognizable and higher quality prepaid brand to significantly grow prepaid customer base. Metro PCS achieved 167 percent growth over the last year in its third full year of operation under TMUS following the acquisition completion in 2013. Additionally, Metro PCS added more than 476k customers in 2Q16 due in large to its impressive geographic expansion. TMUS has been the only wireless company with positive net subscriber growth in both prepaid and postpaid segments for twelve consecutive quarters. Moving forward under the Un-carrier initiative, management looks to explore joint distribution between the two segments to continue to optimize both brands.
Un-carrier Initiative
Launched in 2013, Un-carrier has been TMUS’s radical initiative to drive simplification and transparency for customers through various promotions and plan benefits. JUMP! is an offering that allows customers to pay an additional $10-$30 a month that allows them to upgrade their handset every six months with insurance and extended warranty. One of the most influential initiatives introduced was Binge On. This offering made video streaming 3x more efficient for customers while allowing them to stream programs such as HBO, Hulu, Netflix, and WatchESPN for free. Over 99 percent of customers kept Binge On activated with their plans when introduced and has significantly increased customer video consumption. The success of Binge On led to the development and implementation of T-Mobile ONE, TMUS’s sole postpaid plan offering moving forward. Launched in September, this plan provides unlimited talk, text, 4G LTE, and video and music streaming at a more affordable price. For one line this plan is $70, to add a second line it is $50, and for all lines beyond that it is $20.
T-Mobile ONE has created significant differentiation from competitors and provided a strong runway for outperformance over the investment horizon. TMUS’s network capacity allows them to be the only major carrier capable of implementing this unlimited strategy for all customers while increasing quality globally, benefiting the network, and increasing ARPU. Due to the 480p resolution video streaming limit, TMUS has cut existing data consumption by 50 percent and directed customers away from HD streaming. As this strategy is fully rolled out, TMUS will see significant upside as results continue to distance themselves from overcrowded network providers such as Verizon and AT&T.
Thesis Point 2:
▪ Continued outperformance in net adds
▪ Un-Carrier initiative
OUSEMG EQUITYRESEARCH 4
DECEMBER 11, 2016 | T-MOBILE US INC. (TMUS)
Network Investment and Expansion
Expansive Network in the U.S.
T-Mobile has had the fastest 4G LTE Network for the past two and a half years, and on August 4, 2016, Nielsen Mobile Insights released results from a survey placing TMUS at the top for customer sentiment. TMUS uses mid-band spectrum licenses such as Advanced Wireless Services and Personal Communications Services, and low-band spectrum licenses which utilizes its 700 MHz A-Block spectrum. On its 700 MHz A-Block Spectrum, TMUS is able to deploy its Extended Range LTE which is able to reach twice the distance and work four times faster in buildings on average than its regular LTE signal. This upgraded LTE service currently covers 190 million people in over 300 market areas. TMUS’s LTE service as a whole has had a YOY growth of 40 million customers from 2014 to 2015, bringing its coverage to 305 million people, and its nationwide network covers 91 percent of people in the U.S.
The Growing Process of the TMUS LTE Network
TMUS has also been investing significantly over the past couple of years into enhancing its network to provide higher-bandwidth mobile communications services. These past investments have been made primarily to support the growth of LTE and have therefore focused on the use of a strategy focused on modernizing its network and 4G evolutions. In 2014, TMUS acquired multiple spectrum licenses in 19 markets from Verizon Wireless for 700 MHz A-Block Advanced Wireless Service (AWS) and Personal Communications Services (PCS), costing it $2.4 billion. Along with this, TMUS also acquired AWS spectrum licenses that covered 97 million people. TMUS continued to invest in its network throughout 2015 by entering into multiple agreements with Verizon (VZ) and AT&T (T) for the exchange of additional AWS and PCS spectrum licenses. TMUS plans to continue to invest into 2016 as well with an increase of $300 million in the range of capital expenditures for property and equipment from FY2015, but its past investments have already put TMUS next to its competitors in LTE coverage. TMUS is currently the nation’s third-largest wireless carrier with around 68 million customers. However, Its LTE network covers nearly 312 million POPs, which is higher than T’s roughly 300 million POPs and right alongside VZ’s 312 million POPs. Now TMUS is able to focus on the development of its network so that it can cover patchy areas and enable high-speed LTE connections across its entire network. TMUS primarily works on its AWS-1 and 700 MHz licenses, but it spent around $1.8 billion on AWS-3 spectrum licenses, and has said it could start building out those licenses as early as this year. The Federal Communications Commission's Auction
T-Mobile has had the fastest 4G LTE Network for the past two and a half years, and on August 4, 2016, Nielsen Mobile Insights released results from a survey placing TMUS at the top for customer sentiment. TMUS uses mid-band spectrum licenses such as Advanced Wireless Services and Personal Communications Services, and low-band spectrum licenses which utilizes its 700 MHz A-Block spectrum. On its 700 MHz A-Block Spectrum, TMUS is able to deploy its Extended Range LTE which is able to reach twice the distance and work four times faster in buildings on average than its regular LTE signal. This upgraded LTE service currently covers 190 million people in over 300 market areas. TMUS’s LTE service as a whole has had a YOY growth of 40 million customers from 2014 to 2015, bringing its coverage to 305 million people, and its nationwide network covers 91 percent of people in the U.S.
Thesis Point 3:
▪ Expansive Network in the U.S.
▪ The Growing Process of the TMUS LTE Network
▪ The FCC’s Auction
OUSEMG EQUITYRESEARCH 5
DECEMBER 11, 2016 | T-MOBILE US INC. (TMUS)
Net Neutrality
Service As a Utility
Management notes that they have yet to fully experience the anticipated downside from the reclassification of their services as publicly necessary utilities, similar to bussing, airlines, and telephone lines. The FCC intends to redefine wireless service providers as Title 2 utilities, which would greatly increase their regulation from state and local governments. By viewing these services as public goods instead of luxuries, the FCC has indicated that customers should have easier access to these services, and at a price that everyone can pay. Monopolies and collaborative agreements between firms will also be more closely monitored by a wider variety of regulatory authorities, further benefiting the consumer.
Defining Data
New contracts will require greater transparency and scrutiny from authorities before being put in place, while existing plans will benefit from being grandfathered in with less strict regulations. For TMUS, current pricing plans are well-established and should fare better than its competitors, which have been relatively slow to adapt pricing around data. The quality of service these contracts provide will also be homogenized, eliminating data-throttling and fast lanes. This will eliminate partnership opportunities for third parties who may wish to speed up their service for certain customers. This has been a focal point of recent controversy, as Netflix and other streaming services require significant amounts of high speed data, and are willing to pay extra to guarantee a high quality service for their customers. Companies have employed data throttling on customers using significant amounts of data, restricting the available streaming speed regardless of their contract. This has led many firms to redefine unlimited data according to their personal preference, and even to claim that customers don’t need or want such unlimited services.
Thesis Risk 1:
▪ Service As a Utility
▪ Defining Data
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07.0
01552.0
03.2
44688.0
06.4
04412.0
017.8
63627.0
0103.6
3
Oth
er
Non-C
ash
Adju
stm
ents
303.0
00.8
3276.0
01.2
3468.0
00.9
82239.0
03.0
5(2
115.0
0)
(8.5
6)
545.0
015.5
7
Changes
in N
on-C
ash
Capital
(497.0
0)
(1.3
6)
(308.0
0)
(1.3
7)
(1474.0
0)
(3.0
8)
(2246.0
0)
(3.0
6)
1602.0
06.4
9(6
62.0
0)
(18.9
1)
Ca
sh
Fro
m O
pe
rati
on
s1
74
0.0
04
.75
17
68
.00
7.8
61
02
5.0
02
.14
54
14
.00
7.3
94
14
6.0
01
6.7
93
54
5.0
01
01
.29
Dis
posa
l of Fix
ed A
ssets
0.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
020.0
00.0
83.0
00.0
9
Capital Expenditure
s(1
159.0
0)
(3.1
7)
(1349.0
0)
(6.0
0)
(1335.0
0)
(2.7
9)
(4724.0
0)
(6.4
4)
(4317.0
0)
(17.4
8)
(4025.0
0)
(115.0
0)
Incr
ease
in I
nvest
ments
0.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
0
Decr
ease
in I
nvest
ments
0.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
0
Oth
er
Invest
ing A
ctiv
itie
s(7
00.0
0)
(1.9
1)
682.0
03.0
3(5
25.0
0)
(1.1
0)
(4836.0
0)
(6.6
0)
(2949.0
0)
(11.9
4)
1930.0
055.1
4
Ca
sh
Fro
m I
nve
sti
ng
Acti
vit
ies
(18
59
.00
)(5
.08
)(6
67
.00
)(2
.96
)(1
86
0.0
0)
(3.8
8)
(95
60
.00
)(1
3.0
4)
(72
46
.00
)(2
9.3
4)
(20
92
.00
)(5
9.7
7)
Div
idends
Paid
(13.0
0)
(0.0
4)
(14.0
0)
(0.0
6)
(14.0
0)
(0.0
3)
(55.0
0)
(0.0
8)
0.0
00.0
00.0
00.0
0
Change in S
hort
-Term
Borr
ow
ings
0.0
00.0
0(1
50.0
0)
(0.6
7)
0.0
00.0
0(5
64.0
0)
(0.7
7)
(418.0
0)
(1.6
9)
(244.0
0)
(6.9
7)
Incr
ease
in L
ong-T
erm
Borr
ow
ings
0.0
00.0
0997.0
04.4
30.0
00.0
03979.0
05.4
32993.0
012.1
22494.0
071.2
6
Decr
ease
in L
ong-t
erm
Borr
ow
ings
(59.0
0)
(0.1
6)
(48.0
0)
(0.2
1)
(41.0
0)
(0.0
9)
(57.0
0)
(0.0
8)
(1019.0
0)
(4.1
3)
(9.0
0)
(0.2
6)
Incr
ease
in C
apital Sto
cks
0.0
00.0
00.0
00.0
00.0
00.0
047.0
00.0
61043.0
04.2
21924.0
054.9
7
Decr
ease
in C
apital Sto
cks
0.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
00.0
0
Oth
er
Fin
anci
ng A
ctiv
itie
s5.0
00.0
15.0
00.0
2(4
5.0
0)
(0.0
9)
63.0
00.0
9(7
5.0
0)
(0.3
0)
(121.0
0)
(3.4
6)
Ca
sh
fro
m F
ina
ncin
g A
cti
vit
ies
(67
.00
)(0
.18
)7
90
.00
3.5
1(1
00
.00
)(0
.21
)3
41
3.0
04
.66
25
24
.00
10
.22
40
44
.00
11
5.5
4
Ne
t C
ha
ng
es i
n C
ash
(18
6.0
0)
$
(0.5
1)
1,8
91
.00
$
8.4
0(9
35
.00
)$
-1
.95
(73
3.0
0)
$
-1.0
0(5
76
.00
)$
-2
.33
5,4
97
.00
$
157.0
6
OUSEMG
EQ
UIT
YR
ES
EA
RC
H
9
T-M
OB
ILE U
S I
NC.
(
TM
US
)
CO
MP
AR
AB
LE A
NA
LY
SIS
RE
LA
TIV
E V
ALU
AT
ION
T-M
ob
ile
US
, In
c.
Pu
bli
c C
om
pa
rab
le C
om
pa
nie
s
Co
ntr
ol
Fir
mCurr
ent
Pric
eM
ark
et
Valu
e1M
ark
et
Weig
htin
gs5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
T-M
obile
US,
Inc.
$58.5
5$48,2
46.1
49.7
%1.4
1x
2.1
1x
1.7
7x
5.8
9x
9.1
4x
6.4
9x
17.6
1x
32.3
2x
16.8
6x
2.2
0x
2.8
3x
2.2
2x
Te
leco
mm
un
ica
tio
ns
Sprin
t Corp
.$8.7
4$34,7
96.3
141.4
%1.5
9x
2.0
3x
1.9
7x
7.1
8x
8.0
0x
6.1
6x
81.7
6x
210.2
5x
27.1
1x
3.5
1x
3.8
6x
2.9
8x
AT
&T
Inc.
$40.4
1$248,1
57.8
17.4
%2.0
5x
2.5
1x
2.1
9x
6.2
3x
7.7
7x
6.6
3x
11.1
5x
14.9
0x
12.7
1x
1.8
5x
2.5
5x
2.1
2x
Veriz
on C
om
municatio
ns
Inc.
$51.1
3$208,4
38.3
10.6
%1.8
9x
2.4
0x
2.4
3x
5.3
4x
6.7
4x
6.6
5x
8.1
6x
9.5
3x
10.2
4x
1.6
2x
2.2
6x
2.1
1x
Mean
21.9
5x
2.4
3x
2.2
7x
5.9
2x
7.3
5x
6.6
1x
14.8
8x
26.4
5x
12.6
8x
1.8
7x
2.5
2x
2.1
8x
Media
n1.8
9x
2.4
0x
2.1
9x
6.2
3x
7.7
7x
6.6
3x
11.1
5x
14.9
0x
12.7
1x
1.8
5x
2.5
5x
2.1
2x
Pre
miu
m/D
isco
unt3
(0.5
4x)
(0.3
2x)
(0.5
0x)
(0.0
3x)
1.7
9x
(0.1
2x)
2.7
2x
5.8
7x
4.1
8x
0.3
3x
0.3
1x
0.0
4x
1) in
mill
ion
s
2) M
ark
et-
va
lue w
eig
hte
d a
ve
rage
3) P
rem
ium
/Dis
co
unt to
th
e m
ark
et-
va
lue w
eig
hte
d a
ve
rage
YT
D
Perf
orm
ance
Re
ve
nu
eE
BIT
DA
EB
ITD
A
Ne
t D
eb
t a
s a
Mu
ltip
le o
f:
EB
IT
En
terp
rise
Va
lue
as a
Mu
tlip
le o
f:
Co
ntr
ol
Fir
mCurr
ent
Pric
eM
ark
et
Valu
e1
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
T-M
obile
US,
Inc.
$58.5
5$48,2
46.1
51.1
%0.9
0x
1.4
6x
1.1
7x
30.9
4x
69.2
0x
31.2
7x
33.0
2x
39.7
7x
15.1
1x
1.5
9x
2.8
1x
2.5
6x
Te
leco
mm
un
ica
tio
ns
Sprin
t Corp
.$8.7
4$34,7
96.3
(0.2
%)
0.6
6x
1.0
5x
1.0
2x
301.5
2x
----
128.9
1x
----
1.3
8x
1.7
0x
1.7
5x
AT
&T
Inc.
$40.4
1$248,1
57.8
3.4
%1.4
4x
1.6
9x
1.4
9x
12.8
1x
14.9
0x
13.6
1x
13.2
4x
13.6
4x
13.0
2x
1.9
2x
1.9
0x
1.9
7x
Veriz
on C
om
municatio
ns
Inc.
$51.1
3$208,4
38.3
4.3
%1.3
1x
1.5
9x
1.6
6x
12.8
5x
12.9
0x
12.8
3x
10.2
6x
10.0
7x
11.7
8x
7.5
5x
13.0
4x
7.1
3x
Mean
21.3
3x
1.6
0x
1.5
3x
33.2
7x
13.0
0x
12.3
2x
20.1
6x
11.1
6x
11.5
7x
4.2
7x
6.6
1x
4.1
4x
Media
n1.3
1x
1.5
9x
1.4
9x
12.8
5x
13.9
0x
13.2
2x
13.2
4x
11.8
6x
12.4
0x
1.9
2x
1.9
0x
1.9
7x
Pre
miu
m/D
isco
unt3
(0.4
3x)
(0.1
5x)
(0.3
6x)
(2.3
3x)
56.2
0x
18.9
6x
12.8
6x
28.6
1x
3.5
4x
(2.6
8x)
(3.8
0x)
(1.5
8x)
5-Y
ear
EPS
CAG
R
Re
ve
nu
eE
arn
ing
sF
ree
Ca
sh
Flo
wB
oo
k V
alu
e
Pri
ce
as a
Mu
tlip
le o
f:
1) in
mill
ions
2) M
ark
et-
valu
e w
eig
hte
d a
vera
ge
3) P
rem
ium
/Dis
co
unt to
the m
ark
et-
valu
e w
eig
hte
d a
vera
ge
En
terp
rise
Va
lue
to
Sa
les M
ult
iple
An
aly
sis
En
terp
rise
Va
lue
to
Sa
les M
ult
iple
An
aly
sis
10%
Reduct
ion
EV/S
ale
s10%
Exp
ansi
on
10%
Reduct
ion
EV/S
ale
s10%
Exp
ansi
on
1.9
x2.1
x2.3
x2.2
x2.4
x2.7
x
10%
Reduct
ion
$40.3
7$50.7
5$59.2
7$67.8
010%
Reduct
ion
$40.3
7$62.3
1$72.1
2$81.9
3
2016E S
ale
s$44.8
5$59.2
7$
68
.74
$78.2
12016E S
ale
s$44.8
5$72.1
2$
83
.02
$93.9
1
10%
Exp
ansi
on
$49.3
4$67.8
0$78.2
1$88.6
310%
Exp
ansi
on
$49.3
4$81.9
3$93.9
1$105.9
0
Pri
ce
to
Bo
ok V
alu
e M
ult
iple
An
aly
sis
Pri
ce
to
Bo
ok V
alu
e M
ult
iple
An
aly
sis
10%
Reduct
ion
P/B
10%
Exp
ansi
on
10%
Reduct
ion
P/B
10%
Exp
ansi
on
2.5
x2.8
x3.1
x5.9
x6.6
x7.3
x
10%
Reduct
ion
$19.6
7$49.7
7$55.3
0$60.8
410%
Reduct
ion
$19.6
7$117.0
3$130.0
3$143.0
4
2016E B
ook
Valu
e$21.8
6$55.3
0$
61
.45
$67.5
92016E B
ook
Valu
e$21.8
6$130.0
3$
14
4.4
8$158.9
3
10%
Exp
ansi
on
$24.0
4$60.8
4$67.5
9$74.3
510%
Exp
ansi
on
$24.0
4$143.0
4$158.9
3$174.8
2
OUSEMG
EQ
UIT
YR
ES
EA
RC
H
T-M
OB
ILE U
S I
NC.
(
TM
US
)
CO
MP
AR
AB
LE A
NA
LY
SIS
AN
ALY
SIS
OF C
OM
PS
On a
n E
V/S
ale
s, P
rice
/Sale
s, a
nd P
rice
/Book m
ultip
le b
asi
s, T
MU
S is
tradin
g a
t a d
isco
unt
com
pare
d t
o its
main
com
petito
rs S
print, V
erizo
n,
and A
T&
T.
This
is
due larg
ely
in p
art
to its
boost
s in
cust
om
er
adds
in t
he last
year.
Sprint
(S)
has
had n
egative e
arn
ings
for
the last
4 e
arn
ings
calls
, but
has
been incr
easi
ng its
EPS w
ith e
very
call
from
–0.2
1 i
n Q
415 t
o –
.04 i
n Q
316.
If it
is a
ble
to c
ontinue t
his
tre
nd,
Sprint
will
see a
posi
tive E
PS i
n 2
017.
Betw
een t
he t
hre
e,
Sprint
arg
uably
has
the m
ost
room
to g
row
, but
they
pose
no t
hre
at
as
their n
et
adds
have
been c
onsi
stently
poor
in c
om
pariso
n t
o T
-Mobile
, Verizo
n,
and A
T&
T.
Ass
ets
Equity
Capita
l
Co
ntr
ol
Fir
mCurr
ent
Pric
eM
ark
et
Valu
e1
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
5-Y
ear
TT
MN
TM
TT
MT
TM
TT
M
T-M
obile
US,
Inc.
$58.5
5$48,2
46.1
9.1
%51.4
3%
53.5
2%
57.3
4%
9.6
8%
6.5
3%
10.5
2%
3.8
2%
2.2
9%
3.8
2%
1.1
7%
4.0
6%
1.6
7%
Te
leco
mm
un
ica
tio
ns
Sprin
t Corp
.$8.7
4$34,7
96.3
1.5
%48.5
9%
52.6
6%
55.8
8%
4.7
0%
0.9
6%
7.2
8%
(2.4
3%
)(6
.20%
)(0
.64%
)(2
.53%
)#
##
##
(3.7
0%
)
AT
&T
Inc.
$40.4
1$248,1
57.8
1.7
%52.2
4%
46.5
9%
49.4
1%
18.6
1%
16.8
7%
17.2
0%
10.5
5%
9.0
0%
9.4
2%
3.2
9%
12.7
5%
5.2
9%
Veriz
on C
om
municatio
ns
Inc.
$51.1
3$208,4
38.3
0.7
%62.1
3%
60.1
6%
59.4
6%
22.8
8%
25.1
6%
23.6
9%
10.9
1%
12.4
1%
12.9
5%
6.6
7%
101.0
4%
12.9
0%
Mean
254.3
2%
53.1
3%
54.9
2%
15.4
0%
14.3
3%
16.0
6%
6.3
4%
5.0
7%
7.2
4%
2.4
8%
34.5
8%
4.8
3%
Media
n52.2
4%
52.6
6%
55.8
8%
18.6
1%
16.8
7%
17.2
0%
10.5
5%
9.0
0%
9.4
2%
3.2
9%
12.7
5%
5.2
9%
Pre
miu
m/D
isco
unt3
(2.8
9%
)0.3
9%
2.4
3%
(5.7
2%
)(7
.80%
)(5
.54%
)(2
.53%
)(2
.78%
)(3
.42%
)(1
.31%
)#
##
##
(3.1
6%
)
Re
turn
On
Op
era
tin
g M
etr
ics
Gro
ss M
arg
inEBIT
Marg
inN
et
Marg
in
1) in
mill
ions
2) A
bso
lute
avera
ge
3
)
Pre
miu
m/D
isco
unt to
the a
bso
lute
avera
ge
16'-17'
Revenue
Gro
wth
OUSEMG
EQ
UIT
YR
ES
EA
RC
H
1
1
T-M
OB
ILE U
S I
NC.
(
TM
US
)
DIS
CO
UN
TE
D C
AS
HFLO
W
T-M
ob
ile
US
, In
c.
Dis
co
un
ted
Ca
sh
Flo
w
CAG
RCAG
R
20
11
20
12
20
13
20
14
20
15
20
16
E2
01
7E
20
18
E2
01
9E
20
20
E2
02
1E
Assu
mp
tio
ns
R
isk
Fre
e R
ate
2.4
1%
Re
ve
nu
e$
4,8
47
.4$
5,1
01
.3$
24
,42
0.0
$2
9,5
64
.0$
32
,05
3.0
45
.9%
$3
6,8
93
.0$
40
,58
2.3
$4
3,4
23
.1$
47
,07
0.6
$4
9,6
12
.4$
50
,60
4.7
5.4
%
Beta
0.7
8
%
YoY G
row
th19.1
%5.2
%378.7
%21.1
%8.4
%15.1
%10.0
%7.0
%8.4
%5.4
%2.0
%
Expect
ed M
ark
et
Retu
rn10.0
0%
(-)
Cost
of
Goods
Sold
3,4
52.3
3,5
71.5
15,8
82.0
20,0
84.0
19,9
62.0
22,4
76.2
23,9
30.0
24,3
16.9
26,3
59.5
27,7
83.0
28,3
38.6
Co
st
of
Eq
uit
y8
.33
% %
of Reve
nue
71.2
%70.0
%65.0
%67.9
%62.3
%60.9
%59.0
%56.0
%56.0
%56.0
%56.0
%
Tota
l Debt
28,9
24.0
Gro
ss P
rofi
t$
1,3
95
.1$
1,5
29
.8$
8,5
38
.0$
9,4
80
.0$
12
,09
1.0
54
.0%
$1
4,4
16
.8$
16
,65
2.3
$1
9,1
06
.1$
20
,71
1.1
$2
1,8
29
.5$
22
,26
6.1
7.5
%
Tax R
ate
25.0
5%
%
Marg
in28.8
%30.0
%35.0
%32.1
%37.7
%39.1
%41.0
%44.0
%44.0
%44.0
%44.0
%C
ost
of
De
bt
4.0
9%
%
YoY G
row
th7.2
%9.7
%458.1
%11.0
%27.5
%19.2
%15.5
%14.7
%8.4
%5.4
%2.0
%
Debt
Capita
lizatio
n63.6
0%
(-)
Opera
ting E
xpenditu
res
644.0
696.8
7,3
82.0
8,8
63.0
10,1
89.0
10,6
99.0
12,3
77.6
13,4
61.2
14,5
91.9
15,3
79.8
16,1
93.5
E
quity
Capita
lizatio
n36.4
0%
%
of Reve
nue
13.3
%13.7
%30.2
%30.0
%31.8
%29.0
%30.5
%31.0
%31.0
%31.0
%32.0
%
Tax R
ate
25.0
5%
%
YoY G
row
th3.6
%8.2
%959.4
%20.1
%15.0
%5.0
%15.7
%8.8
%8.4
%5.4
%5.3
%W
AC
C6
.32
%
Op
era
tin
g I
nco
me
$7
51
.2$
83
3.0
$1
,15
6.0
$6
17
.0$
1,9
02
.02
0.4
%$
3,7
17
.9$
4,2
74
.7$
5,6
45
.0$
6,1
19
.2$
6,4
49
.6$
6,0
72
.68
.5%
%
Marg
in15.5
%16.3
%4.7
%2.1
%5.9
%10.1
%10.5
%13.0
%13.0
%13.0
%12.0
%
%
YoY G
row
th10.5
%10.9
%38.8
%(4
6.6
%)
208.3
%95.5
%15.0
%32.1
%8.4
%5.4
%(5
.8%
)Cum
ula
tive V
alu
e o
f FCF
$15,1
56.3
(-)
Inte
rest
Expense
263.0
277.9
1,2
89.0
1,4
50.0
1,5
78.0
1,6
99.0
1,9
05.4
1,7
42.4
1,8
56.0
1,8
55.0
1,8
55.0
Term
inal Y
ear
FCF
$3,5
57.6
Ta
xa
ble
In
co
me
$4
88
.2$
55
5.1
-$1
33
.0-$
83
3.0
$3
24
.0(7
.9%
)$
2,0
18
.8$
2,3
69
.3$
3,9
02
.6$
4,2
63
.2$
4,5
94
.6$
4,2
17
.61
3.1
%T
erm
inal G
row
th R
ate
2.0
0%
%
Marg
in10.1
%10.9
%-0
.5%
-2.8
%1.0
%5.5
%5.8
%9.0
%9.1
%9.3
%8.3
%Capita
lizaito
n R
ate
4.3
2%
(-)
Taxes
178.3
213.3
16.0
166.0
245.0
802.7
990.6
1,4
24.0
1,5
69.0
1,7
33.3
1,7
49.4
FV o
f Ente
rpris
e V
alu
e$82,3
50.8
%
Tax
Rate
36.5
%38.4
%-1
2.0
%-1
9.9
%75.6
%39.8
%41.8
%36.5
%36.8
%37.7
%41.5
%D
isco
unt
Fact
or
0.7
36
NO
PA
T$
30
9.9
$3
41
.8-$
14
9.0
($9
99
.0)
$7
9.0
(23
.9%
)$
1,2
16
.1$
1,3
78
.6$
2,4
78
.6$
2,6
94
.2$
2,8
61
.3$
2,4
68
.21
2.5
%P
V o
f E
nte
rpri
se
Va
lue
$7
5,7
73
.10
%
Marg
in6.4
%6.7
%-0
.6%
-3.4
%0.2
%3.3
%3.4
%5.7
%5.7
%5.8
%4.9
%
(
-) D
ebt
$28,9
24.0
%
YoY G
row
th2.5
%10.3
%(1
43.6
%)
570.5
%(1
07.9
%)
1,4
39.4
%13.4
%79.8
%8.7
%6.2
%(1
3.7
%)
(-)
Pre
ferr
ed S
tock
0.0
(+
) D
&A
544.1
648.1
3,6
42.0
4,6
75.0
5,0
64.0
6,2
83.3
6,6
46.8
6,8
81.2
6,5
16.1
6,8
35.7
7,0
55.0
(-)
Min
orit
y I
nte
rest
0.0
%
of Reve
nue
11.2
%12.7
%14.9
%15.8
%15.8
%17.0
%16.4
%15.8
%13.8
%13.8
%13.9
%
(
+)
Cash
& E
quiv
ale
nts
$7,5
80.0
(+
) N
on-C
ash
Expense
s1,3
56.3
624.1
4,5
91.7
2,1
58.0
2,3
60.0
(1,4
49.4
)1,5
12.4
2,4
35.1
2,0
13.3
2,9
76.7
3,0
36.3
0.0
60
Imp
lie
d E
qu
ity
Va
lue
$5
4,4
29
.10
%
of Reve
nue
28.0
%12.2
%18.8
%7.3
%7.4
%(3
.9%
)3.7
%5.6
%4.3
%6.0
%6.0
%Curr
ent
Share
s O
uts
tandin
g824.0
(-)
Capita
l Expenditu
res
956.0
869.0
4,4
06.0
7,2
17.0
6,6
59.0
4,7
70.6
5,1
61.0
5,4
53.3
5,7
65.4
6,0
03.3
6,3
25.6
Imp
lie
d S
ha
re P
rice
$6
6.0
5 %
of Reve
nue
19.7
%17.0
%18.0
%24.4
%20.8
%12.9
%12.7
%12.6
%12.2
%12.1
%12.5
%Curr
ent
Share
Pric
e$56.7
4 %
YoY G
row
th19.6
%(9
.1%
)407.0
%63.8
%(7
.7%
)(2
8.4
%)
8.2
%5.7
%5.7
%4.1
%5.4
%U
pside/D
ow
nside
16.4
%
Curr
ent
Ass
ets
2,6
68.6
3,1
09.1
12,2
28.0
13,9
84.0
14,8
90.0
13,8
08.3
15,6
38.8
19,1
09.0
22,4
90.1
27,0
71.8
28,9
88.9
%
of Reve
nue
55.1
%60.9
%50.1
%47.3
%46.5
%37.4
%38.5
%44.0
%47.8
%54.6
%57.3
%
%
YoY G
row
th76.7
%16.5
%293.3
%14.4
%6.5
%(7
.3%
)13.3
%22.2
%17.7
%20.4
%7.1
%
Curr
ent
Liabilit
ies
816.7
847.8
5,8
08.0
8,7
76.0
9,5
28.0
9,3
85.5
10,3
14.0
12,0
51.7
14,6
61.0
15,4
78.6
14,7
19.4
%
of Reve
nue
16.8
%16.6
%23.8
%29.7
%29.7
%25.4
%25.4
%27.8
%31.1
%31.2
%29.1
%
%
YoY G
row
th1.8
%3.8
%585.1
%51.1
%8.6
%(1
.5%
)9.9
%16.8
%21.7
%5.6
%(4
.9%
)
(-)
Changes
in N
WC
1,1
43.9
409.4
4,1
58.7
(1,2
12.0
)154.0
(939.3
)902.0
1,7
32.6
771.7
3,7
64.1
2,6
76.3
%
of Reve
nue
23.6
%8.0
%17.0
%(4
.1%
)0.5
%(2
.5%
)2.2
%4.0
%1.6
%7.6
%5.3
%
Fre
e C
ash
Flo
w1
10
.23
35
.6(4
80
.0)
(17
1.0
)6
90
.04
4.3
%2
,21
8.7
3,4
74
.94
,60
9.0
4,6
86
.52
,90
6.4
3,5
57
.68
.2%
Curr
ent
Ente
rpris
e V
alu
e$53,5
24.8
0.0
60
1.0
00
1.0
00
1.0
00
1.0
00
0.9
40
Curr
ent
EBIT
DA
$6,9
66.0
0.9
41
0.8
85
0.8
32
0.7
83
0.7
36
0.6
92
Cu
rre
nt
EV
/E
BIT
DA
7.7
x
Pre
se
nt
Va
lue
of
FC
F$
12
5.8
$3
,07
4.0
$3
,83
5.0
$3
,66
7.7
$2
,13
9.3
$2
,31
4.5
62
.5%
Implie
d E
nte
rpris
e V
alu
e$60,6
16.8
EB
ITD
A$
1,2
95
.2$
1,4
81
.1$
4,7
98
.0$
5,2
92
.0$
6,9
66
.04
0.0
%$
10
,00
1.2
$1
0,9
21
.5$
12
,52
6.2
$1
2,6
35
.3$
13
,28
5.4
$1
3,1
27
.54
.6%
Implie
d E
BIT
DA
$13,1
27.5
%
Marg
in26.7
%29.0
%19.6
%17.9
%21.7
%27.1
%26.9
%28.8
%26.8
%26.8
%25.9
%Im
pli
ed
EV
/E
BIT
DA
4.6
x
%
YoY G
row
th14.3
%14.3
%224.0
%10.3
%31.6
%43.6
%9.2
%14.7
%0.9
%5.1
%(1
.2%
)
Conve
rsio
n R
ate
8.5
%22.7
%(1
0.0
%)
(3.2
%)
9.9
%22.2
%31.8
%36.8
%37.1
%21.9
%27.1
%
Cust
om
FCF
Pre
sent
Valu
e F
act
or
Tim
e W
eig
hte
d F
act
or
Disco
unte
d C
ash
Flo
w C
hara
cteris
tics
Weig
hte
d A
vera
ge C
ost
of
Capita
l
Exit
Multiple
s
Histo
rical D
ata
Pro
ject
ion P
erio
d
Cust
om
Revenue
Cust
om
CO
GS
Cust
om
OPEX
Cust
om
Tax
Cust
om
D&
A
Cust
om
Non-C
ash
Cust
om
CAPEX
Cust
om
Ass
ets
Cust
om
Lia
bilit
ies
∆1
.62
x2
.62
x3
.62
x4
.62
x5
.62
x6
.62
x-1
.0%
0.0
%1
.0%
2.0
%3
.0%
4.0
%5
.0%
(9%
)$
11
,94
6-$
2.4
5$12.0
4$26.5
4$41.0
4$55.5
4$70.0
33
.32
%$261.0
9$264.6
8$268.2
7$271.8
6$275.4
5$279.0
5$282.6
4
(6%
)$
12
,34
0-$
1.6
8$13.3
0$28.2
7$43.2
5$58.2
2$73.2
04
.32
%$138.2
5$140.2
2$142.1
8$144.1
4$146.1
1$148.0
7$150.0
3
(3%
)$
12
,73
4-$
0.9
1$14.5
5$30.0
0$45.4
5$60.9
1$76.3
65
.32
%$89.3
9$90.7
1$92.0
3$93.3
5$94.6
7$95.9
9$97.3
1
0%
$1
3,1
28
-$0.1
3$15.8
0$31.7
3$47.6
6$63.5
9$79.5
26
.32
%$63.1
2$64.1
0$65.0
8$66.0
5$67.0
3$68.0
1$68.9
9
+3%
$1
3,5
21
$0.6
4$17.0
5$33.4
6$49.8
7$66.2
8$82.6
97
.32
%$46.7
2$47.4
8$48.2
5$49.0
1$49.7
8$50.5
4$51.3
1
+6%
$1
3,9
15
$1.4
1$18.3
0$35.1
9$52.0
7$68.9
6$85.8
58
.32
%$35.4
9$36.1
1$36.7
4$37.3
6$37.9
8$38.6
0$39.2
2
+9%
$1
4,3
09
$2.1
9$19.5
5$36.9
2$54.2
8$71.6
5$89.0
19
.32
%$27.3
2$27.8
4$28.3
6$28.8
8$29.4
0$29.9
2$30.4
4
Cost of Capital
Imp
lie
d S
ha
re P
rice
Te
rmin
al Y
ea
r S
ale
s G
row
th
Imp
lie
d S
ha
re P
rice
EB
ITD
A M
ult
iple
OUSEMG
EQ
UIT
YR
ES
EA
RC
H
1
2
T-M
OB
ILE U
S I
NC.
(
TM
US
)
AN
NO
TA
TE
D S
TO
CK C
HA
RT
0202
1
Seri
es1
30.2
3
35.2
3
40.2
3
45.2
3
50.2
3
55.2
3
60.2
3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
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0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
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0.2
0.2
0.2
0.2
0.2
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0.2
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0.2
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0.2
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0.2
0.2
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0.2
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0.2
0.2
0.2
0.2
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0.2
0.2
0.2
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0.2
0.2
0.2
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0.2
0.2
0.2 8-
Dec
22-J
an7-
Mar
19-A
pr1-
Jun
14-J
ul
25-A
ug7-
Oct
18-N
ov
30354045505560
8-D
ec8-
Jan
8-Fe
b8-
Mar
8-A
pr
8-M
ay8-
Jun
8-Ju
l8-
Au
g8-
Sep
8-O
ct8-
No
v8-
Dec
iPhone 7
ord
er
at T-M
obile
and S
jum
p o
ver
ealrie
r
models
Ea
rnin
gs
EPS:
0.1
65
Est
imate
: 0.1
78
Ea
rnin
gs
EPS:
0.2
7
Est
imate
: 0.2
3
Ea
rnin
gs
EPS:
0.5
60
Est
imate
: 0.0
93
Talk
s of s
Sprint
and
T-M
obile
merg
er
rise
once
again
Ea
rnin
gs
EPS:
0.2
50
Est
imate
:0.2
14