2 Factors That Create Opportunity For T-Mobile Over The Longer Term

The two significant events in Q3 were T-Mobile ONE [T1] terminating data allowances and the iPhone 7 sparking aggressive promotional behavior among carriers, Morgan Stanley’s Simon Flanner said in a report. He added that both these events offer T-Mobile US Inc TMUS the opportunity to gain market share in the longer term, albeit with some near-term uncertainty.

Analyst Flanner maintained an Overweight rating on the company, with a price target of $52.

T-Mobile ONE

Launched in Q3, T1 offers an unlimited plan, greatly simplifying T-Mobile's offering by eliminating data plans.

“The plan builds on the foundation of BingeOn and MusicFreedom, which allowed T-Mobile to study how customers consume data on its network, and subsequently increased T-Mobile's confidence in the progress of their network,” Flanner wrote. He added that T1 would likely appeal to most wireless subscribers. The company recently indicated an improvement in its porting ratios.

iPhone7

Prior to the iPhone 7 launch, T-Mobile offered a promotion of $0 in exchange for the iPhone 6 or 6s and a 24-month agreement, subject to certain conditions. Subsequently, T-Mobile disclosed that iPhone 7 pre-orders had broken records, having risen almost four times the next most popular iPhone pre-order cycle, “suggesting a strong reaction to the iPhone 7 promotion,” the analyst noted.

T-Mobile then released solid quarter-to-date subscriber metrics, with +753k of postpaid net adds and +650k prepaid net adds. “These data points reinforce our conviction in T-Mobile's market share gain story,” Flanner commented.

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