T-Mobile US Inc (NASDAQ:TMUS) Is a Buy after Its Incredible Run with Subscribers
One thing that became apparent when T-Mobile US Inc (NASDAQ:TMUS) posted its first quarter earnings is that the growth momentum that helped catapult it to the third spot is still in play. The stock is already making a case for itself of why it is a strong buy, the wireless giant having successfully reversed a negative subscriber growth trajectory.
T-Mobile has shown it can grow its subscription base even on facing stiff competition from AT&T Inc. (NYSE:T) and Verizon. Having registered 12-straight quarters of subscriber growth, the company’s prospects look brighter than ever as revenues continue to grow robustly.
Taking AT&T and Verizon Head On
Taking on AT&T and Verizon Communications Inc. (NYSE:VZ) should be T-Mobile next big play as it looks to increase its market share further. Its third spot in the business all but looks assured given that Sprint is aggressively cutting back on costs as it looks to shore up its earnings.
Paying a great deal of attention to customer needs and exciting packages has so far helped the carrier bridge the gap on the two juggernauts. Remaining price competitive in terms of plans has also helped T-Mobile shrug off competition in the industry.
It is highly unlikely that the other carriers will initiate similar changes to counter the threat at hand, given that they are looking for ways to bolster their earnings.
People Falling In Love with T-Mobile
Given that, T-Mobile has proved it can remain profitable while offering affordable plans; it should be able to attract more subscribers. It has already devised an effective way of making its plans enticing as part of a new marketing strategy.
By offering simplified plans, unbundled handsets and addressing customer, pain points through marketing campaigns, T-Mobile is already having a ripple effect in the sector. Its subscription base can only continue to grow as more customers make the switch to take advantage of what is on offer.
International Expansion for Growth
T-Mobile US Inc (NASDAQ:TMUS) is not only pursuing opportunities for growth in the US. Mexico and Canada are the new marketplaces that the company has set its eyes on as it looks to bolster its subscription base. The carrier now allows people to make calls to the two countries without having to worry about any incremental fee.
Unlike in the past, T-Mobile has invested big on network upgrades as it strives to provide quality network reception across the country to attract more subscribers. Free international roaming services across the US, Mexico and Canada all but continues to affirm its credentials among users across North America.
Why Subscription Addition Is Important
The amount of revenue and free cash flow generated in the wireless business is dependent on the amount of subscribers a carrier has on its network. Thanks to the momentum in subscriber addition T-Mobile EBITDA margin has expanded from lows of 25% as of 2014 to highs of 32% as of the first quarter of this year. Free cash flow, on the other hand, is poised to clock highs of $2 billion this year compared to negative $90 million as of 2014.
Free cash flow should continue to grow, as T-Mobile US Inc (NASDAQ:TMUS) is no longer spending big on its equipment installment plan. A growing subscriber base is also expected to continue providing a more operating advantage.
T-Mobile US Inc (NASDAQ:TMUS) continues to outperform its peers in the industry. Given that its earnings per share is expected to grow by 45% this year compared to 5% and 3.4% for AT&T and Verizon Communications Inc. (NYSE:VZ) further affirms how solid its growth prospects are in the industry. Given that the carrier is, increasingly adding new subscribers the stock should trade higher on earnings beat going forward.
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