TMUS

Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), AT&T Inc (T), Charter Communications Inc (CHTR), Comcast Corp (CMCSA), DISH Network Corp (DISH), Sprint Corp (S), SoftBank Group Corp (9984 JP), T-Mobile US Inc (TMUS), Verizon Communications Inc (VZ)

Highlights

T-Mobile (TMUS) is in the midst of a major transition. Wireless is an incredibly important service in the US market, and the presenter’s view is that TMUS’ brand strength combined with a migration to 5G could “bring consumers to a new, far better place - in terms of the quality and speed of service - faster than anyone else". The upside potential for patient TMUS shareholders could, in the presenter’s opinion, be greater than the Street appreciates. At $68/share, the stock sits comfortably at 6.5x the out-year consensus EBITDA forecast (this is the lower bound of its normal 6.5x - 8.5x EBITDA valuation range). Value drivers include: the Sprint deal, which has a path for approval and would bring $8.7B of synergies and scale to TMUS; a 5G roll out that does not require a large capex step-up; improving service revenue and subscriber trends; increasing consumer adoption of wearable/connected devices; and multiple expansion. If everything goes TMUS’ way, and the presenter’s estimates are accurate (i.e., all of the drivers contribute max value), then TMUS stock could reach $240 by the end of 2020.

The Transition to 5G and Merger with Sprint

The wireless industry in its entirety is about to go through a material transformation via the shift to 5G. The presenter stressed the importance of understanding how meaningful the improvements in a) quality of service and b) speed will be with 5G. Said differently, what consumers receive for each subscription dollar paid to a wireless provider is about to change for the better. The shift also affords TMUS the opportunity to merge with Sprint.