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T-Mobile Launches Home Broadband to Disrupt Cable Industry

Supriyo Bose

As the digital barriers between wireless telecom and cable firms seem to blur with a consolidated product portfolio, various companies from these two industries are stepping into each other’s territory to tap a niche market. T-Mobile US, Inc. TMUS is the latest to follow this trend. The company has launched a pilot home broadband Internet service for rural and underserved markets to disrupt the cable industry.

T-Mobile has rolled out the pilot project for existing customers on an invitation-only basis due to LTE network and spectrum capacity constraints and intends to reach about 50,000 rural and underserved U.S. households by the end of this year. Although this represents a small fraction of the entire population (about 0.04%), the carrier expects to amplify its coverage to extend service to more than half of U.S. households (approximately 9.5 million) by 2024 through merger with Sprint Corporation S.    

The company is presently offering unlimited broadband service for $50 per month, which is about 29% lower than the average $70 per month charge that rural customers usually pay for comparable in-home Internet service. The service is being offered through fixed wireless LTE network with a speed of around 50Mb/s. In addition, T-Mobile is offering subscribers an LTE receiver/router for free to avail this service.

T-Mobile is reportedly promoting this project in such markets where it has excess capacity on its wireless network, so that the marginal cost of the service remains minimal. The strategic move is expected to disrupt the U.S. broadband market, hitherto controlled by monopolistic cable firms, by offering more options and lower prices. Moreover, limited competition in rural and underserved areas will ensure a steady revenue stream for the company and facilitate it to capture a niche market with significant upside potential.

Moving forward, T-Mobile plans to launch its own streaming TV service. The acquisition of Layer3 TV has boosted its streaming service. T-Mobile will leverage LTE network speeds and Layer3 TV’s technology to roll out TV streaming service. Notably, offering of such services has become a popular trend in the industry. The company’s improved mobile plans, stellar network performance, deployment of LTE-U technology and attractive unlimited data offers remain key growth drivers. These are ably supported by improving scale, healthy free cash flow generation, strong liquidity and spectrum assets that provide credit support.

Over the past year, the stock has gained 17.8% compared with the industry’s rally of 8.3%. We remain impressed with the healthy growth potential of this Zacks Rank #3 (Hold) company.


Some better-ranked stocks in the industry are CenturyLink, Inc. CTL and Telenav, Inc. TNAV, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CenturyLink has a long-term earnings growth expectation of 5.3%. It topped estimates in each of the preceding four quarters, average positive earnings surprise being 23.4%.

Telenav beat earnings estimates in each of the last four quarters, the average being 23.7%.

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