T-Mobile (TMUS) is still dialing up big gains for investors as it works through its integration of Sprint and 5G rollout.
Shares of the telecom provider are up a sizzling 71% to $133.31 over the past year. The stock broke through that 70% mark on Thursday, powered by a fresh round of upbeat financial guidance.
T-Mobile said Thursday evening it delivered a record 5.5 million net postpaid phone additions in 2020. A total of 1.6 million of those additions came in the fourth quarter as consumers clamored for new 5G iPhones from Apple. The company’s prior quarterly guidance called for 600,000 to 700,000 net postpaid additions.
“It was a big beat,” T-Mobile CEO Mike Sievert told Yahoo Finance Live.
But the story of T-Mobile’s stock advance this past year — notable in the sense that telecoms normally have steady stock prices and tend to attract investors via robust dividends — reflects several factors beyond one quarter of numbers.
First, T-Mobile is generating more cost savings from its $30 billion Sprint deal (closed in April 2020 after a two year battle with lawmakers) than Wall Street expected. Sievert tells Yahoo Finance the company achieved its $1.2 billion cost savings goal for the Sprint/T-Mobile integration in 2020. T-Mobile is eyeing to double that synergy number in 2021, Sievert said, as the company decommissions Sprint cell towers and further integrates the business.
Note that T-Mobile said at the time of the Sprint deal it aims to wring out $43 billion in deal-related synergies over time. So far, so good on that journey in the eyes of Wall Street.
Meanwhile, the company’s success in 2020 in keeping Sprint customers — in industry parlance, driving low churn — has been evident. That appeared in the new guidance T-Mobile put out Wednesday, only fueling a view among investors the telecom could play nicely in the 5G phone upgrade cycle. Such a cycle is widely expected to drive opportunities for telecoms to push through higher cellular plan prices as consumers get hooked on the higher data speeds.
“We believe the combination of Sprint and T-Mobile will be a positive to both the combined company as well as the industry, as it offers some level of market-healing potential in what has become a saturated space,” JPMorgan telecom analyst Philip Cusick said.
The next two catalysts for investors to look out for based on our analysis: (1) upbeat long-term guidance when T-Mobile reports earnings in a few weeks; and (2) a signal on its upcoming earnings day of a more aggressive pace of share repurchases.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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