UBS Sees T-Mobile's New Initiatives Helping Lower Churn, Sustain Subscriber Momentum

UBS maintained its Buy rating on T-Mobile US Inc TMUS, saying that initiatives announced on its Un-carrier event will help lower churn and sustain the company's subscriber momentum.

T-Mobile introduced three new offerings:

1) "TMobile Tuesdays", a new app offering free items (movie tickets, pizza, etc.) every week to its postpaid/prepaid subs "51 million subscribers at the end of the first quarter."
2) "Stock Up" -- offering one free share for new and existing postpaid accounts (not a primary issuance of shares)"; and

3) "Get Thanked at 30,000 Feet", providing one free hour of WiFi on every Gogo equipped flight (on top of unlimited messaging)."

The company indicated the "T-Mobile Tuesdays" app will offer $30 worth of free items in its first week, with the pulse and type of free gifts changing over time.

"With most postpaid and prepaid customers eligible for this offer, we believe a combination of breakage (not every customer will do this) and wholesale discounts for T-Mobile will keep the cost in check, which management suggested is already reflected in guidance," analyst John Hodulik wrote in a note.

Hodulik estimates 2016 EPS of $1.26 versus consensus estimate of $1.31. UBS, which maintained its $47 price target, sees 3.7 million postpaid net additions in 2016 versus company guidance of 3.2 - 3.6 million.

At the time of writing, shares of T-Mobile rose 1.81 percent to $43.85.