T-Mobile US's Talks With Dish Network Put Focus on Already Attractive Stock

NEW YORK (TheStreet) -- T-Mobile US (TMUS) jumped Thursday on news it was in talks to merge with Dish Network (DISH).

Even before the merger talks focused the spotlight on T-Mobile US, however, it was already an attractive investment because of the recent turnaround that T-Mobile US has staged.

T-Mobile US shares are up $1.73, or 4.5%, at $40.06 Thursday morning, following The Wall Street Journal's report about the talks, which cited anonymous sources familiar with the discussions. Details on a purchase price and what mix of cash and stock would be involved remained unresolved, the report said.

Investors should note that Dish has embarked on merger talks with other wireless and satellite companies in recent years without reaching final deals, as the Journal pointed out.

Headquartered in Bellevue, Wash. T-Mobile US is the fourth largest provider of mobile communication services in the U.S., providing services under the T-Mobile and MetroPCS brands. As of the end of 2014, it provided service to more than 55 million customers.

Under the leadership of CEO John Legere since 2012, T-Mobile has successfully differentiated itself as the low-cost provider in the marketplace, with prepaid and low-cost, postpaid plans with no annual service contract.

It will even buy out your current carrier contract in order to win your business. T-Mobile has positioned itself as the "uncarrier."

T-Mobile's aggressive marketing tactics appear to be paying off. Branded postpaid net customer additions for 2015 are now expected to be in a range of 3 million to 3.5 million customers, which is an increase from previous guidance of 2.2 milion to 3.2 million.

In its latest quarterly report, on April 28, T-Mobile US beat Wall Street's estimates for revenue, although it did miss earnings per share estimates by 5 cents.

The company said it had 1.8 million total net adds, 1.1 million of which were branded postpaid net additions. It also reported its best ever postpaid churn, which was only 1.3%. Low churn means that customers are staying with the company and appear satisfied with the cost and service. T-Mobile is now dangerously close to passing Sprint (S) as the No. 3 wireless provider.

All these new adds will help T-Mobile US to fund more than $5 billion in spectrum growth over the next year with minimal market impact.

Deutsche Telekom (DTEGY) still owns 66% of T-Mobile and said at its recent shareholder meeting that it's still looking for a U.S. partner for T-Mobile. Last year, Deutsche Telekom tried to sell T-Mobile US to Sprint but ran into regulatory resistance.

Over the last year, T-Mobile has staged a successful turnaround, ending years of subscriber losses with cut-price deals, a savvy marketing campaign, and new wireless plans, Reuters noted. So unlike one year ago, Deutsche Telekom is in the proverbial driver's seat, under no pressure to sell T-Mobile, but certainly open to the possibility.

As T-Mobile has turned around it business over the last year, its share price has also recovered.

TMUS Chart

TMUS data by YCharts

So let's take a "Best Stock Now" view on T-Mobile stock.

Data from Best Stocks Now app.

T-Mobile U.S. is a $31 billion large-cap telecommunications company. Its risk profile is considered Moderate. I own T-Mobile for my Conservative Growth Accounts.

Data from Best Stocks Now app.

On a valuation basis, T-Mobile was trading at 21 times forward earnings as of the end of last week. It gets a Value Grade of B given its recent run. But look at its estimated five-year annual growth rate of 68%. That is considerably higher than its competitors. By comparison, Verizon (VZ), AT&T (T), and Sprint have growth rates of only 6%, 4.5%, and 5% respectively. T-Mobile is by far the up and coming growth player in the space.

Data from Best Stocks Now app.

And thanks to a successful reinvention of itself after the dissolution of the Sprint deal, the stock was up 42% year to date as of the end of last week. (Shares are up 49% year to date on Thursday morning in the wake of the Dish Network news.) Compare that to last year's dismal performance of -20%. Its Momentum Grade is A.

Data from Best Stocks Now app.

T-Mobile stock rates a buy rating and is ranked an A-. It is currently No. 73 out of the more than 4,100 stocks in the Best Stocks Now universe. T-Mobile's "uncarrier" approach is succeeding, transforming the company into a valuable asset and a Best Stock Now.

This article is commentary by an independent contributor. At the time of publication, the author held shares of TMUS.

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