Evercore Partners: T-Mobile U.S. Will Strive With Or Without A Buyout

Investors continue buying shares of

with expectations that the company will be acquired at a hefty premium by France based

Jonathan Schildkraut

of Evercore Partners is suggesting buying shares of T-Mobile U.S. is a prudent move regardless of any potential M&A outcome. “While we do not believe [Iliad's] bid is likely to draw enthusiasm from either T-Mobile U.S. or investors – we believe it could serve as the impetus for a bidding war that will ultimately result in the expected bid from

” the analyst wrote in a note to clients on Monday. Schildkraut notes that shares of T-Mobile U.S. have a $34 price support level should a takeover of the company fall through. As such, shares of a “positive relationship” of upside versus downside at current levels.

While M&A chatter adds a bullish thesis to shares of T-Mobile, investors should be reminded that the mobile provider is operating just fine on its own. T-Mobile U.S. reported a service revenue of $5.48 billion, reflecting an improvement of 2.8 percent from last quarter and a 15.3 percent improvement from a year ago. The company also saw “strong” EBITDA growth of $1.45 billion which rose 33.4 percent from last quarter and 29.1 percent from a year ago. Additionally, the mobile provider's cash EBITDA growth which expanded 57.4 percent from a year ago to $954 million was described as “surprisingly strong.” Cash EBITDA margins improve by 710 basis points from last quarter and 470 basis points from a year ago to 17.4 percent. The analyst notes that this “represents a big improvement.” “The net/net is that T-Mobile U.S.' reported metrics are inflecting – and as cash results represent a larger portion of EBITDA the quality of earnings get better.” In terms of net subscriber additions in the recent quarter, T-Mobile U.S. reported it added 1.47 million new subscribers, above the 1.15 million figure the analyst estimated. Postpaid churn was flat at 1.5 percent while coming in below the analyst expectation of 1.55 percent. According to the analyst, “the lower churn is indicative of T-Mobile U.S.' ability to retain customers through their offerings.” Bottom line, T-Mobile U.S. could benefit from “the world of potential acquirers” which may be larger than Iliad and Sprint. As such, the analyst upgraded shares to Over-weight from Equal-weight with a price target raised to $40 from a previous $34.