Analysts: T-Mobile likely to continue strong subscriber growth into Q4

T-Mobile US (NYSE:TMUS) is likely going to report very strong third-quarter results--and will continue its momentum through the fourth quarter thanks to the launch of Apple's (NASDAQ: AAPL) iPhone 6 and 6 Plus, according to financial analysts.

"TMUS continues to deliver disproportional subscriber growth over the larger peers," Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote in a research note. "We expect strong 3Q momentum will accelerate into 4Q given the iPhone carryover & the holiday season, leading to further upside to subscriber guidance. We expect little impact from Sprint  (NYSE: S) given the carrier's inferior network standing, & relatively weaker brand image."

T-Mobile added 760,000 branded net customers in the month of August alone, which was its best month ever in terms of postpaid net adds, according to CEO John Legere. The figures included 552,000 postpaid net additions and 208,000 prepaid net adds. To put those numbers in context, T-Mobile added 672,000 branded net customers in the full third quarter of 2013, and had 1.01 million branded net subscriber additions for the entire second quarter of 2014.

The financial analysts also are taking a rosier outlook on T-Mobile's finances going forward. They noted that Wall Street consensus that T-Mobile will report EBITDA in 2015 of around $7 billion is too conservative (they think it will be more like $7.6 billion). "We conservatively assume little near-term improvement in TMUS's cost structure, but believe upside is possible" thanks to T-Mobile's efforts to migrate MetroPCS' CDMA customers onto T-Mobile's GSM network. That work appears to be running over a year ahead of schedule, the analysts noted.

Interestingly, the analysts said M&A is possible still with T-Mobile, despite the collapse of talks for a merger this summer with Sprint. "In our opinion, acquiring the co. remains one of the few means to enter the U.S. wireless market without a large build-out and/or spectrum investment," they wrote.

Last week at an industry conference, Legere dismissed all of the rumors surrounding the carrier's potential M&A activity as "craziness," and said he is "sick and tired" of the takeover and merger rumors.

In late July, Iliad made its initial $15 billion bid for 56.6 percent of T-Mobile, valuing the carrier at $33 per share, which T-Mobile parent Deutsche Telekom said was too low. According to a recent Bloomberg report, which cited unnamed sources familiar with the matter, Iliad now plans to price its offer at $33 per share but it will be for a "significantly larger" stake in T-Mobile. Iliad, controlled by billionaire entrepreneur Xavier Niel, has reportedly set a deadline of mid-October to either make an improved offer to take control of T-Mobile or abandon its pursuit.

Meanwhile, according to an FCC filing, T-Mobile is looking to snag yet more 700 MHz A Block spectrum, this time from Grain Spectrum IV, which is owned by Grain Management, a company that invests in and manages spectrum and network infrastructure in North America. The 700 MHz spectrum at issue is in the Dayton-Springfield, Ohio area. According to a database produced by Brian Goemmer, an analyst with wireless spectrum research firm AllNet Labs, T-Mobile's deal with Grain Spectrum covers 1.12 million POPs.

The latest image from AllNet Labs shows all of T-Mobile 700 MHz A Block spectrum with Grain Spectrum included. Click here for a larger version of this image.

T-Mobile is also looking to purchase PCS spectrum from Grain Spectrum in Cincinnati, Ohio, and AWS spectrum from Grain in the Ohio counties of Champaign, Clark, Greene, Miami, Montgomery and Preble, all near the Great Lakes.

T-Mobile has said that, in the past several months, it has made spectrum deals with smaller 700 MHz A Block spectrum license holders that cover around 17.7 million POPs (and the carrier's filings with the FCC have revealed the details of various spectrum deals totaling 17 million POPs, leaving just 700,000 POPs remaining). Those purchases build on the 700 MHz A Block spectrum T-Mobile bought from Verizon Wireless (NYSE: VZ) for $2.4 billion covering 150 million POPs, in a deal announced in January.

For more:
- see this FCC filing (PDF)

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