T-Mobile US CEO Mike Sievert.
ROBYN BECK/AFP/Getty ImagesThe U.S. wireless industry is in the early innings of an upgrade to next-generation 5G networks. That’s coinciding with a major change in industry structure, with T-Mobile US’s acquisition of Sprint closing earlier this year.
Speaking at Goldman Sachs ’ annual Communacopia media and telecom conference on Wednesday, T-Mobile management gave a characteristically upbeat and confident update on the company’s 5G progress, competitive position, and future growth.
CEO Mike Sievert hails the new T-Mobile (ticker: TMUS) as the best option for U.S. wireless customers due to a combination of its new portfolio of network assets and value-focused pricing.
“The No. 1 reason why people leave is network-related,” said Sievert on Wednesday, clad in T-Mobile’s signature magenta-accented attire. “Secondly is to seek better value. This company will be positioned to deliver the best network and the best value simultaneously for the first time in history.”
Sievert outlined three key goals T-Mobile is currently focused on. First is to deliver growth that’s faster than the wireless industry as a whole. That means winning business from competitors. In its first period with Sprint—the second quarter of 2020—T-Mobile delivered faster subscriber and revenue growth than AT&T (T) and Verizon Communications (VZ).
Second on Sievert’s list of priorities is to deliver on the promises of the T-Mobile/Sprint union. That means cutting duplicative costs in the networks, retail operations, and back-office functions of the previously separate companies—and using the larger combined heft of new T-Mobile to leverage economies of scale in various parts of the business.
Last but not least, Sievert wants T-Mobile to be focused on the long-term picture.
“Thirdly, are we doing those two things without borrowing from tomorrow?” Sievert said. “Are we setting up this company for long-term success? Those are the three things we’ll be measured on, and you’ll see us systematically clipping away priorities against all three of those objectives as we execute.”
T-Mobile Chief Technology Officer Neville Ray gave an update on the company’s progress in integrating the legacy T-Mobile and Sprint networks. That means adjusting the geographic footprint of cellular towers where there is overlapping coverage or gaps, but also adding new wireless spectrum bands that will support 5G.
Earlier this week, T-Mobile and cell tower REIT American Tower (AMT) announced a 15-year, $17 billion contract to lease space for antennas. Ray said that T-Mobile was upgrading 700 sites a week to support mid-band spectrum, which offers an attractive trade off between capacity and range. Gaining access to Sprint’s mid-band licenses was a key motivation for T-Mobile’s acquisition. Ray said that more than 10% of Sprint customers are already using the new T-Mobile network.
“We are literally off to the races,” Ray said. “There will be thousands of sites benefiting from that mid- and low-band combination on 5G this year, [including] 40 of the major metro areas across the U.S. That 5G experience is markedly different from what’s out there on 4G LTE today, with eight to 10 times the speed going to be available for customers with 5G phones this year.”
Sievert wants T-Mobile to use the 5G transition to jump ahead of competitors, like Verizon did in the transition to 4G a decade earlier. Since unifying the Sprint and T-Mobile brands last month, the company is now focused on communicating to consumers that it believes it will have the industry’s best 5G network.
“I’ll give Verizon credit. At the dawn of the 4G era in 2010, they jumped out in front of everybody, and that established a brand pattern that they were able to feed on for a decade through the entire 4G era,” Sievert said. “They had the world convinced they had the best network. And for much of that era, it was absolutely true. That’s our opportunity in the 5G era. We’re way out in front.”
Wall Street analysts are bullish on T-Mobile stock, with 81% giving it a Buy or equivalent rating. Their average price target is about $137 a share.
T-Mobile stock has surged 42% in 2020, versus a 3.7% return for the S&P 500 and a negative 2.2% return for the Dow Jones Industrial Average. Shares were down 2%, at $111.48, in recent trading.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com
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September 17, 2020 at 11:07PM
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T-Mobile Is ‘Way Out in Front for the 5G Era,’ Says Its CEO. Wall Street Agrees. - Barron's
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