T-Mobile Investors Could Be In For An Interesting Second Half

Credit Suisse analyst Matthew Niknam spoke with T-Mobile US Inc TMUS this week to get a better sense of where the third-largest U.S. telecom company is headed for the remainder of 2017.

“Bottom line, we came away positive on [T-Mobile's] ability to execute amidst an increasingly challenging competitive backdrop,” said Niknam in a note.

That said, the analyst’s rating and price target remained unchanged at Hold and $69.

Catalysts

Despite seasonally slower volumes all-around in the second quarter and increased headwinds from aggressive postpaid phone competition from Verizon Communications Inc. VZ and AT&T Inc. T unlimited plans, the analyst expects T-Mobile to maintain its market share, while several second half 2017 catalysts could drive prepaid growth.

• The release of Apple Inc. AAPL's iPhone 8 should drive more consumers to switch to T-Mobile, as indicated from historical data.
• Progress on the company’s build out of the new 600 MHz spectrum will improve coverage in under-penetrated regions.
• The company should see greater B2B growth, a space in which T-Mobile’s current share is less than 5 percent.

In The Long Term

“[T-Mobile] has leveraged aggressive network investments and a unique customer value proposition to grow share in recent years,” said Niknam

These investments have driven its scale, which should soon become apparent in the form of a free cash flow ramp up. Niknam believes that catalysts have been delayed though, due to heightened defensive strategies from competitors.

Finally, despite swirling rumors of a merger between T-Mobile and Sprint Corp S, it seems doubtful that the Federal Trade Commission would allow one to go through.

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Image: Mike Mozart, Flickr