T-Mobile (TMUS) Stock Dropped on Low Band Spectrum Competition

NEW YORK ( TheStreet) -- Shares of T-Mobile US   (TMUS) closed down 1.19% to $39.03 as it seeks to thwart AT&T  (T)'s attempt to buy spectrum, Zacks Equity Research reports.

T-Mobile, the fourth largest national telecom operator in the U.S., is constantly building pressure on larger peers like AT&T and Verizon Communications (VZ) with respect to wireless spectrum procurement, Zacks Equity Research said.

T-Mobile has asked the Federal Communications Commission to block the purchase of low-band spectrum by AT&T from East Kentucky Network through a secondary market transaction.

T-Mobile US argued that the purchase of low-band spectrum is not in tune with the FCC's stated policy of public interest. The deal will have serious anticompetitive consequences with the increasing concentration of below-1-GHz spectrum in the hands of AT&T, analysts at Zacks added.

Meanwhile, AT&T has denied the allegation and stated that the said spectrum is at present fallow and unused and therefore will not affect the competitive spirit in any way.

This is not the first time that T-Mobile has raised questions regarding spectrum purchase by AT&T and Verizon. The FCC is likely conduct a low-band airwaves auction called "incentive auction," according to the analyst note.

Separately, TheStreet Ratings team rates T-MOBILE US INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate T-MOBILE US INC (TMUS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T-MOBILE US INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, T-MOBILE US INC turned its bottom line around by earning $0.29 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.73 versus $0.29).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 58.3% when compared to the same quarter one year prior, rising from -$151.00 million to -$63.00 million.
  • The revenue growth significantly trails the industry average of 55.9%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 47.62% is the gross profit margin for T-MOBILE US INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.80% is in-line with the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: TMUS Ratings Report

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