T-Mobile is likely to maintain its relative share of the postpaid phone market during a seasonally slow second quarter, Matthew Niknam of Deutsche Bank predicted.
And the rest of the year could be very interesting for the carrier.
T-Mobile continued to build on its momentum in the first quarter of 2017, adding 798,000 postpaid phone subscribers and enjoying record-low postpaid churn of 1.18%. Though it won’t see quite as many subscriber gains during the current quarter, Deutsche Bank analysts said after meeting with carrier representatives this week, it will likely add roughly 600,000 postpaid phone subscriptions.
“Industry switching appears to have moderated post a more competitive 1Q,” Niknam wrote. “As such, we expect T-Mobile’s 2Q postpaid phone net adds to reflect a seasonal slowdown, though our estimates are in line with consensus. We note that Verizon and AT&T have also more aggressively touted new unlimited plans intra-quarter as well. Prepaid volumes are likely to see elevated quarter-over-quarter headwinds from both seasonality and more aggressive competition, which T-Mobile has chosen not to match (citing ‘challenged economics’ in these competitor offers).”
Things could heat up again for T-Mobile in the coming months, though, Niknam said, citing a few factors. The expected launch of a redesigned iPhone could spur more switching activity, which would almost surely benefit T-Mobile. The carrier will also continue to expand its retail footprint in an effort to leverage its buildout of the 600 MHz spectrum it won at auction a few months ago. And finally, it may gain traction in the business-to-business market where it currently claims a market share of less than 5%.
Of course, the major questions about T-Mobile center on a potential tie-up with Sprint. Speculation of a merger between the two has heated up considerably in recent months, with Deutsche Telekom reportedly looking to retain control of a combined carrier.
“M&A (unsurprisingly) remains a top area of investor focus,” Niknam observed. “We believe key items that may need to be addressed prior to a potential deal with Sprint include relative valuation, capital structure at the pro forma entity, and ultimately gaining comfort with regulatory approval prospects … (W)e think a potential intra-wireless deal would face significant regulatory challenges, given the risks it would post to industry competition.”