Here is an overview of the wireless situation in the United States. There are many problems in this area, including the reduction of the telephone market and the emergence of cable competitors. In addition, street forecasts for 2024 + seem too high, given the oversaturation of the market and the growth of the US population by only 1.6 million people. However, TMUS is in a winning position as a company capable of stealing a stake and increasing revenue from synergy with Sprint.
TIKR
TMUS
PRICE
$143,67 (-0.17%)
TARGET PRICE
$165
UPSIDE
14,85%
Key trends:
1. The wireless industry in the United States is in a difficult position
Due to the decreasing reserve of phones, 5G competition, as well as the emergence of cable competitors that do not aim to make a profit (“fighting the outflow of subscribers”), the situation is not easy. Street LTs may be too expensive, given the saturation of the market and the growth of the US population at the level of ~ 1.6 million per year.
2. The dynamics of the development of cable mobile communications continues
35% additions in 4Q 22; CMCSA emulates CHTR’s offer of “free mobile.”
3. Recession and Consumers Prioritized
Recession-resistant businesses, but ARPU growth may be difficult; T-Mobile is buying Mint to increase the cost of services.
4. Endless Boost Delays
A slow start, growth is expected to increase when VoNR reaches scale (70% VoNR by the beginning of the year).
5. Waiting for private networks and P5G
There has been a lot of talk about private networks at MWC. It’s about “when,” not “if,” and “later,” not “earlier”
7. Continuous Wireless – Trends Persist
The dynamics are strong, albeit somewhat weakened; attractive prices ideal for DSL/value seekers; it is supposed to move to a rural area, where the throughput is more significant.
8. Value Score: T-Mobile Preference
Verizon stock yields slightly above AT&T for the first time in recent history; T-Mobile remains the favorite.
AT&T
In the fourth quarter of the 22nd year, good results were published, including the 2023 forecast for good EBITDA, a slight decrease in FCF, a fall in EPS (inoperative items) and current expenses. EBITDA growth/FCF decline indicates conversion issues now being addressed. A lower FCF for the cleanup has been set and expects a decrease in capital expenditures in the 24th year. The plan is expected to be implemented consistently, taking into account the achievement of the FCF indicator of $16B.
T-Mobile
TMUS announced mixed 4Q22 results and an initial forecast for the 23rd quarter with EBITDA growth but FCF decline. The weaker outlook for the FCF for 2023 was a little disappointing, however, it includes 1x payments, although fundamentals and dynamics remain unchanged, and the growth of joint activity targets provides a good reserve for 2024. Despite the inflated valuation, TMUS will continue to make a profit, especially in the current market.
T-Mobile’s position is the best in the industry:
- 5G No. 1 network, tariff plans at lower prices, new opportunities to launch new projects in rural areas/enterprises) to win a larger segment of the narrowing market
- Significant improvement in outflow efficiency indicators as a result of integration with Sprint; ARPA growth is expected to be 1% in 2023
- Two years ahead of 5G adoption rivals
- Synergy from Sprint provides a big gain to FCF, share buybacks. The $8 billion synergies target creates good conditions for 2024
Verizon
PTVZ provided mixed 4Q22 results and muted initial recommendations for 2023, as price increases, a good influx of FWA customers and BusinessWireless’s strong performance proved insufficient to offset depreciation, cost pressures and interest expense. The 2023 outlook is an achievable development, while a pivot towards consumer wireless is still a “showcase.” However, multi-year Sales Earnings Growth (FCF) and robust dividends make stocks a defensive tool in the face of reduced risk.