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T-Mobile US Preparing to Deploy 600-MHz Low-Band Spectrum

Zacks Equity Research

T-Mobile US Inc. TMUS, the third largest U.S. national wireless operator, has decided to roll out 600 MHz wireless spectrum in its footprints by this summer. Notably, in Apr 2017, the U.S. telecom regulator, Federal Communications Commission (FCC) declared the names of the winning bidders for its latest 600 MHz low-band wireless spectrum auction, popularly known as -- Incentive Auction. The company was one of them.

The auction raised around $19.8 billion from 50 bidders who won nearly 2,800 licenses in total. T-Mobile US acquired the largest portion (nearly 45%) of the available spectrums by offering a sum of nearly $8 billion. The company won 1,525 licenses and bought around 31 MHz of spectrums in the 600 MHz low-band frequencies.

The U.S. telecom giant, AT&T Inc. T, took the fourth place after acquiring 23 licenses for a total bid price of over $910 million. Surprisingly Verizon Communications Inc. VZ, the largest U.S. telecom operator, did not bid for the 600 MHz low-band spectrum despite registering itself for the bidding process. Meanwhile, Sprint Corp. S did not take part in the auction process altogether.

Low-band spectrum is essential for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities. T-Mobile US plans to extensively roll out 600 MHz spectrum later this year when new smartphones for this radio frequency are likely to be made available by Samsung and other manufacturers.

T-Mobile US believes that its innovative network expansion methodologies are driving substantial consumer growth. In the first quarter of 2017, it added net 0.798 million branded postpaid phone, 0.116 million branded postpaid mobile broadband and 0.386 million branded prepaid customers. However, the company lost 0.158 million wholesale customers during the same period.

Total net customer addition was 1.142 million, signifying the 16th successive quarter of over one million net customer additions. Several analysts estimate that the company has managed to gain customers from other three major U.S. wireless carriers.

Price performance of T-Mobile US

T-Mobile US has had a solid start in 2017. Year to date, the stock price has gained 10.59% compared with the Zacks categorized U.S. National Wireless industry’s decline of 8.41%.

Nevertheless, the U.S. wireless market is highly competitive and almost saturated. Success in the wireless service business largely depends on technical superiority, quality of services and scalability. In all three areas, T-Mobile US is far behind its peers AT&T and Verizon Communications. Also, Sprint is extensively restructuring its business model and leaving no stone unturned for a possible merger.

We believe that these are the primary reasons for the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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