Analysts: T-Mobile to gain most market share in Q1

T-Mobile US (NYSE:TMUS) is likely going to continue to be the leader in gaining wireless market share in the first quarter, according to new estimates from financial analysts at Evercore ISI.

T-Mobile reports its first-quarter earnings tomorrow. Last week, AT&T Mobility (NYSE:T) said it added 1.218 million wireless connections in the first quarter, including 441,000 postpaid customers and 945,000 connected devices (the majority of which were connected cars). Verizon Wireless (NYSE: VZ) added 565,000 retail postpaid customers in the first quarter, fewer than analysts had expected. Sprint (NYSE: S) reports its quarterly earnings May 5.

In a research note, Evercore analysts Jonathan Schildkraut and Justin Ages wrote that they expect T-Mobile to add 905,000 postpaid customers (up from their initial estimate of 725,000) in the first quarter, including 750,000 postpaid phone customers. The analysts think that the company has won the game of porting ratios in the quarter and added more customers than it lost to competitors. The analysts said T-Mobile has benefited from what they believe was "a successful increase in promotional activity."

Under its "Carrier Freedom" program, which T-Mobile announced in mid-March, T-Mobile will cover all outstanding phone and tablet equipment installment or leasing payments up to $650 per line for up to 10 lines when customers switch to T-Mobile from Verizon, AT&T and Sprint. However, customers will then need to buy a new phone from T-Mobile. T-Mobile also fully rolled out its "Data Stash" rollover data program to its postpaid and prepaid customers in the first quarter.

Other analysts are actually more bullish about T-Mobile's prospects than Evercore. Wells Fargo thinks T-Mobile will add 1.03 million postpaid customers in the first quarter, and analysts at Jefferies think T-Mobile will notch 1.1 million postpaid handset customers alone.

As a result of all of the subscriber growth, the Evercore analysts wrote that they expect T-Mobile's EBITDA and EBITDA margins to fall from the fourth quarter, down to $1.3 billion and 16.5 percent, respectively. However, they also expect those financial metrics to improve on a year-over-year basis.

Looking ahead to the rest of 2015, the Evercore analysts think T-Mobile will continue to improve its free cash flow, "demonstrating to the market that TMUS can continue to compete aggressively, invest in its network, and generate a return on capital at the same time." The analysts also expect T-Mobile to see the amount of money it takes in from equipment installment plan billings to exceed the amount of money it is financing for such plans.

The analysts noted that T-Mobile's continued success may help it acquire more spectrum. The company already is deploying low-band spectrum in the 700 MHz A Block, and it expects to participate in the upcoming 600 MHz auction slated for 2016. "If TMUS reaches the [financial] milestones we highlighted, the company may not have to return to the capital markets (or only in a limited fashion) in order to participate in the incentive auction," they wrote.

Meanwhile, now that Comcast (NASDAQ: CMCSA) has dropped its $45.2 billion quest to buy Time Warner Cable (NYSE: TWC), some analysts think Comcast could turn around and try to buy T-Mobile. "While a purchase of a company like T-Mobile (as opposed to assets for Comcast's potential Wi-Fi based offering which is easy) might be seen as raising some issues similar to those involving purchasing a wired ISP, the wireless market is much more competitive and the public benefit of Comcast strengthening that market by entry is much clearer and therefore such a deal is likely to be approved," wrote analysts at New Street Research in a research note.

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