T-Mobile Vs. AT&T: Who Has The Better Outlook For 2017?

T-Mobile US Inc TMUS and AT&T Inc. T both attended Deutsche Bank's Media and Telecom conference. Here is a summary of what analysts are saying after the presentations.

AT&T

Deutsche Bank's Matthew Niknam maintained a Hold rating and $42 price target on AT&T's stock.

The analyst noted that AT&T laid out its top priorities for 2017, including: 1) completing its merger with Time Warner Inc TWX, 2) continued integration of DirecTV, 3) improve the wireless system through network investments, 4) continued innovation in products and bundling initiatives, and 5) achieve incremental cost savings.

The company also communicated three capital allocation priorities, including: 1) paying its dividend, 2) investing in network and products, and 3) de-leveraging the balance sheet to target 1.8x over time.

AT&T noted its equipment revenue is expected to be lighter in the first quarter due to a lower than expected upgrade volume and service revenue trends for all of 2017 could be impacted by the heightened competitive landscape.

The company also said it expects to see profitability improvements in its international business and achieve an overall mid-single digit earnings per share growth.

T-Mobile

Niknam maintained a Buy rating on T-Mobile's stock with an unchanged $68 price target.

Similar to AT&T, T-Mobile presented its top priorities for 2017, including: 1) maintaining growth momentum in postpaid and prepaid, 2) ramping up its free cash flow, and 3) building out its network and footprint with a 700MHz A-block and geographic distribution expansion.

Niknam stated that T-Mobile's management "generally sounded a positive tone" in postpaid phone volumes and porting ratios versus its peers.

The company stated it's comfortable with its current video strategy and does seek out content ownership. In terms of Wireline/Cable, the company believes convergence will occur over time and draw regional players into a more national platform.

In terms of intra-Wireless M&A activity, T-Mobile highlighted regulatory hurdles, including the fact that any deal would likely involve a substantial break-up free if a merger isn't approved.

The Winner

Niknam didn't offer a top pick among the two names but given his Buy rating on T-Mobile and Hold rating on AT&T, the choice may be clear.

The analyst highlighted that T-Mobile continues to scale its business with a focus on winning new customers and keep its average revenue per user stable. In addition, the company is looking to expand its capabilities in the B2B space where it holds less than a 5 percent market share.

See Also:

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Tougher Fundamentals Trump Strategic Positioning For AT&T

Image: Mike Mozart, Flickr