T-Mobile (TMUS), the wireless telephone carrier, is a Top Pick for 2023, notes Jospeh Bonner, an analyst with Argus Research, a leading independent Wall Street research firm.
We cannot overstate the strategic importance of T-Mobile's April 2020 Sprint acquisition. In addition to a broad customer base, Sprint supplied T-Mobile with a trove of mid-band spectrum that has allowed it to rapidly build out its next-generation 5G mobile wireless network, thus gaining a competitive advantage over Verizon (VZ) and AT&T (T).
Although 5G is a small part of the wireless industry, it promises to be the next growth driver for the industry and for T-Mobile in particular. Management has highlighted third-party assessments stating that T-Mobile had the best 5G coverage and the fastest download speeds.
The appeal of T-Mobile's service plan innovations to wireless customers has been amply demonstrated by its robust subscriber addition metrics. While T-Mobile has successfully captured the wireless consumer market, its next assaults will be on wireless business customers, and on residential cable and internet service with its 5G home internet fixed wireless broadband service.
Management has targeted a 20% market share in wireless business services by 2025 and claims to have the fastest-growing broadband internet service in the U.S.
We think that T-Mobile remains the best positioned of the national carriers to take market share. Its unlimited-service business model and low-cost operating structure are oriented to appeal to price-sensitive consumers. T-Mobile has always aimed at the value-oriented segment of the market.
The success of the company's service plan innovations has been evident in its robust subscriber acquisition metrics and in the efforts of competitors to copy various plan features, the latest being Verizon's 'Disney Plus on us' promotion.
Apart from 5G service, T-Mobile is looking to grow by increasing its U.S. small market penetration though a network buildout into rural areas, adding in-home fixed wireless broadband access to its mobile wireless service package, and expanding into wireless business services, long the bastion of Verizon and AT&T.
TMUS shares are up 31% year-to-date versus a 19% capital decline for the S&P, and an 11% decline for the S&P Telecom Services Industry Group index. TMUS is far outpacing the capital returns of its top competitors (negative 27% for Verizon and flat for AT&T). We are maintaining our "buy" rating on T-Mobile and raising our target price to $175.
