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Why T-Mobile Is Beating AT&T and Verizon

Stocks in this article: TMUS VZ T S

Exactly one year after T-Mobile completed its acquisition of MetroPCS, the company said it's making rapid progress on expanding and integrating it. T-Mobile has added 30 new markets in which the MetroPCS brand operates, and opened nearly 2,200 distribution points in these new markets as of March 31. T-Mobile has switched roughly 53% of MetroPCS customers to its network. The company started selling T-Mobile-compatible devices to MetroPCS customers in the second quarter of last year. More than 50% of the MetroPCS spectrum has been re-farmed and integrated into the T-Mobile network as of the end of the first quarter.

T-Mobile expects branded postpaid net additions between 2.8 million and 3.3 million for the full year and adjusted EBITDA to be in the range of $5.6 to $5.8 billion, it said.

"T-Mobile reported strong 1Q14 results with postpaid net adds 26% greater than our estimate. EBITDA came in slightly below due to success based costs. We believe investors should take a cue from consumers and buy T-Mobile," Credit Suisse analyst Joseph Mastrogiovanni wrote in an early note. The analyst has an "outperform" rating on T-Mobile.

That said, the first quarter is likely a "high watermark" for subscriber additions, Mastrogiovanni penned.

"We expect subscriber growth from ETF to slow throughout the rest of the year, as this is likely to have a high early adopter impact and then a slowdown (you either break your contract as soon as you can or you've decided to stick with your current carrier)," the note says. "We have already heard evidence of this from the other carriers which indicated that their own subscriber trends improved toward the end of 1Q. We have a hard time imagining another Uncarrier initiative having the same level of success as ETF, but TMUS has surprised us before. However, we think the results of ETF reflect the demand for T-Mobile's services or, at a minimum, the dissatisfaction with the other carriers, which likely means strong momentum should continue. T-Mobile's new guidance implies an average of ~575k adds/quarter for the rest of the year."

--Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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