T-Mobile overtakes Verizon and AT&T in subscriber growth -- Wells Fargo

[T Mobile store front inside a mall in New Jersey. T Mobile is the third largest mobile carrier in the US based on number of subscribers.]
Tak Yeung

With the widest 5G coverage and strong mid-band spectrum for fast, scalable wireless service, T-Mobile (NASDAQ:TMUS [https://seekingalpha.com/symbol/TMUS]) is expected to keep leading the industry in subscriber and revenue growth, prompting Wells Fargo to upgrade the stock to Overweight from Equal_ _Weight.

“Strategically, TMUS is ahead of its peers from a wireless network performance perspective,” said Wells Fargo analyst Eric Luebchow, noting that the premium multiple versus peers AT&T (NYSE:T [https://seekingalpha.com/symbol/T]) and Verizon (NYSE:VZ [https://seekingalpha.com/symbol/VZ]) has compressed. And while the stock still trades at a premium to these peers, Luebchow believes TMUS is better positioned to outperform from current levels.

Conversely, Luebchow sees Equal Weight-rated Verizon (NYSE:VZ [https://seekingalpha.com/symbol/VZ]) remaining rangebound until new chief executive Dan Schulman articulates a strategic direction.

“The near-term trends remain challenging [for Verizon], with consumer net phone loses continuing in Q3 and our EBITDA estimates coming down slightly as VZ leans into promotions into Q4,” Luebchow adds.

As wireless competition intensifies amid decelerating subscriber growth, Luebchow anticipates a surge of promotional activity into Q4, leaving Verizon (NYSE:VZ [https://seekingalpha.com/symbol/VZ]) with the “steepest hill to climb” to get back to higher consumer postpaid phone adds for FY25, while T-Mobile’s (NASDAQ:TMUS [https://seekingalpha.com/symbol/TMUS]) and AT&T’s (NYSE:T [https://seekingalpha.com/symbol/T]) consensus estimates look “achievable.”

“We expect that TMUS can easily maintain its leaderships position in postpaid subscriber growth in the years ahead…and continue to grow market share vs its Big 3 peers,” he adds, noting that the competitive differentiation with Verizon (VZ [https://seekingalpha.com/symbol/VZ]) and AT&T (NYSE:T [https://seekingalpha.com/symbol/T]) largely comes from the private/value equation for its wireless offerings. Verizon (VZ [https://seekingalpha.com/symbol/VZ]) and AT&T (T [https://seekingalpha.com/symbol/T]) have been the most aggressive over the past 2 years in raising prices on subscribers, while T-Mobile (NASDAQ:TMUS [https://seekingalpha.com/symbol/TMUS]) is offering even greater value on its “base rates.”

While the majority of Wall Street analysts and Seeking Alpha authors continue to view both Verizon (VZ [https://seekingalpha.com/symbol/VZ]) and T-Mobile (TMUS [https://seekingalpha.com/symbol/TMUS]) as a Buy, Seeking Alpha’s Quant rating gives the advantage to T-Mobile (TMUS [https://seekingalpha.com/symbol/TMUS]) with a Buy rating and score of 3.74 out of 5. By comparison, Verizon (VZ [https://seekingalpha.com/symbol/VZ]) is viewed as a Hold with a lower score of 3.44.

MORE ON T-MOBILE US, VERIZON, ETC.

* AT&T: Q3 Earnings Preview, The Reason Why The Market Is Growing Uneasy [https://seekingalpha.com/article/4830348-at-and-t-q3-earnings-preview-the-reason-why-market-growing-uneasy]
* AT&T: The Telecom Giant To Buy [https://seekingalpha.com/article/4830195-at-and-t-the-telecom-giant-to-buy]
* Verizon: Setting The Bar [https://seekingalpha.com/article/4830135-verizon-setting-the-bar]
* RBC Capital Markets turns bullish on T-Mobile US over solid operating trends [https://seekingalpha.com/news/4503939-rbc-capital-markets-turns-bullish-on-t-mobile-us-over-solid-operating-trends]
* SA Asks: What's the best telecom play right now? [https://seekingalpha.com/news/4503475-sa-asks-whats-the-best-telecom-play-right-now]