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As the ongoing rollout of the 5G network continues and cellphones are now owned by over 95% of the population in the United States, telecommunications stocks have become a major holding for many investors.
T-Mobile US, Inc. (NASDAQ: TMUS) has expanded its subscriber base, increased revenue and boosted its market share due to industry consolidation during the company’s pending acquisition of Sprint (NYSE: S).
T-Mobile Stock Performance and Company History
Based in Washington, T-Mobile was originally formed as a subsidiary of Western Wireless Corporation, a provider of wireless personal communications services (PCS), and was marketed in 19 urban markets under the Cellular One name. The division was spun off in May 1999 when Deutsche Telekom AG purchased it in 2001 for $35 billion and renamed T-Mobile USA. In 2004, T-Mobile USA became T-Mobile US and had its initial public offering (IPO) for 24,000,000 shares priced at $20 to $22 each.
T-Mobile began its rollout in California and Nevada. It then expanded its coverage in the South, Puerto Rico and the U.S. Virgin Islands with the company’s 2007 purchase of SunCom Wireless Holdings. In March 2011, Deutsche Telekom AG accepted a $39 billion bid from AT&T (NYSE: T) for T-Mobile US, but the merger was blocked by the U.S. Justice Department.
T-Mobile merged with MetroPCS in 2013, and its stock was listed on the NASDAQ exchange as TMUS. Today, T-Mobile is the third-largest provider of mobile communications services in the United States. The company’s flagship MetroPCS and T-Mobile brands now provide wireless services to more than 44 million subscribers through 70,000 points of distribution.
Future Outlook for T-Mobile
TMUS stock traded under $8 per share as recently as 2012 and has since rallied considerably, reaching an all-time high of $84.25 on July 1, 2019. The stock then pulled back somewhat and currently trades near $77 per share.
T-Mobile’s pending merger with Sprint will give the merged company a customer base of over 126 million subscribers, which would make the T-Mobile US/Sprint company a closer competitor with the largest wireless providers, AT&T and Verizon.
The pending merger would expand T-Mobile’s coverage and add millions of Sprint customers. But 14 states have filed a lawsuit to block the merger, citing fewer options for customers and an unnecessary concentration of ownership that could increase prices given a less competitive environment.
On July 25, 2019, T-Mobile reported its strongest second quarter customer growth in years, as well as record financial results. For the company’s Q2, T-Mobile reported 1.8 million net additions, showing an increase of 11% year on year (YoY). Also, T-Mobile reported 1.1 million branded postpaid net additions that was up 9% YoY and 710,000 branded postpaid phone net additions that rose 3% YoY.
Furthermore, T-Mobile boasted record service revenues of $8.4 billion that was up 6%, as well as a 9% rise in branded postpaid service revenues. The firm’s total Q2 revenues of $11 billion were up 4%, and net income of $939 million showed an impressive increase of 20%. Diluted earnings per share came to $1.09, showing an increase of 18% for the quarter.
Earnings before interest, tax, depreciation and amortization (EBITDA) were up 7% to $3.5 billion. The company’s cash position also improved, with Q2 net cash from operations up 70% to $2.1 billion and free cash flow of $1.2 billion, up 51%. T-Mobile US’s market capitalization is currently $66.417 billion.
Also, while T-Mobile is not as stable as its competitor AT&T that pays a dividend, the merger with Sprint would result in considerably more customers, and the company would be in a better strategic position to compete with AT&T and Verizon.
T-Mobile’s financials look strong and show room for more growth, especially with the Sprint merger. Its recent momentum suggests that investing in T-Mobile could provide a decent return on capital appreciation in the long term.
Why You Might Want to Buy It
Here are a few pros of adding T-Mobile to your portfolio.
- Industry leader: T-Mobile already owns a significant percentage of the wireless market in the United States. The company’s market share does not currently seem threatened by other carriers, and if the merger with Sprint goes through, the merged company’s expanded customer base should improve revenue and earnings.
- Growth prospects: T-Mobile showed continued growth in the trailing twelve-month timeframe and consistent quarterly growth since 2007, which could continue in the next few quarters as indicated by the company’s upwardly revised full-year guidance.
- Possible successful merger with Sprint: If the merger proceeds, the restructuring will increase the combined company’s reach to 126 million customers and ultimately boost its earnings and revenue.
Considerations Before You Buy
Before you purchase any stock, here are a few things to think about.
- Economy, stock market downturn: Even though the American public is highly unlikely to give up their cellphones, which gives TMUS stock defensive qualities, an economic downturn might make some customers cancel their more costly subscriptions to save money.
- Adverse effects of 5G microwave radiation: Until now, the telecommunications industry has assured its customers with research it funded that 5G technology is completely safe, although the frequencies of the microwaves used in 5G transmissions are near those used in the U.S. military’s Active Denial System, which is a microwave generator used for crowd control. Also, long-term exposure to 5G technology has not yet been found to be safe for humans, and non-thermal adverse health effects of cellphone and cell tower radiation are now being considered.
- Possible Sprint merger failure: Analysts are split on the merger deal’s success. If the deal does fall through, then T-Mobile would be the better stock to own of the two, according to most analysts. They largely expect Sprint stock to lose value, while T-Mobile retains more of its value due to its relatively strong financial condition, positive earnings and improved revenue projections.
- No dividend: If you’re an income-minded investor, then you probably wouldn’t be interested in TMUS stock that does not pay a dividend. AT&T stock would probably make more sense for investors looking for a telecommunications stock with a dividend.
How You Can Buy T-Mobile Stock Right Now
If you already have a funded account with a reputable stockbroker that has access to NASDAQ stocks, then you can place a bid right now for TMUS stock. If you don’t have an account open with a broker, your first step is to evaluate several with NASDAQ market access. How you buy T-Mobile stock is just as important as where you trade, so make sure you pick the right broker.
Step 1: Pick a Broker
Knowing what you need in a broker makes your choice a lot easier. For example, if you’re looking for a commission-free broker with limited resources, check out Webull or Robinhood. If you have limited market experience and need an easy-to-use trading platform and educational resources, you could try E*TRADE or TD Ameritrade.
For international stocks and access to other markets, you might consider Charles Schwab, Fidelity Investments or Interactive Brokers, which offer access to U.S. and foreign markets. With Interactive Brokers, you also get excellent commissions, very competitive margin rates and a world-class trading platform, as well as the ability to trade in over 120 world markets.
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Step 2: Open Demo Accounts to Assess Brokers’ Services and Platform
Most online brokers offer their clients and prospective customers a demo or virtual trading account. This type of account lets you trade the market in real-time but without committing any funds. You might want to check out several demo accounts to evaluate which broker best suits you.
Step 3: Fund a Trading Account
Now that you’ve selected a broker, you should be ready to deposit funds into a trading account. While you can open an account without making an initial deposit with many brokers, you’ll still need sufficient funds in an account to buy TMUS stock.
Be sure to check with your broker because different brokers have different methods for deposits and withdrawals, as well as minimum initial deposit requirements.
Step 4: Buy TMUS Stock
Ideally, you’ve taken the time to watch the stock trade using demo accounts before funding a live one. If not, you can watch TMUS stock for a session or two and perform some technical analysis to time your purchase before you enter your bid. Once you’re confident of the price you want to pay, enter a buy order for the amount of stock at that price. You can also simply buy it at the current market price.
Is T-Mobile a Good Investment?
If you have confidence in the telecommunications industry, aren’t too concerned about dividend income, and look forward to 5G technology, then TMUS stock might be a good fit for your portfolio.
Also, the planned merger with Sprint enables you to be invested in both companies in a consolidated industry. T-Mobile remains a leader in its industry and will have the capacity with Sprint to take on both AT&T and Verizon, thereby creating a company with an enterprise value of $160 billion.
On the other hand, the long-term safety of 5G technology and its impact on human health are yet to be determined conclusively despite industry-paid researchers and spokespeople with adamant reassurances. Future reports of adverse health issues arising from 5G technology could harm T-Mobile’s earnings and potentially result in lawsuits.
Just beginning to build your stock portfolio? Check out Benzinga's guides on how to start investing in stocks, how to create a stock investment strategy, and our top picks for the best online brokers for beginners.