T-Mobile vs. AT&T: Which Telecom Stock is a Better Buy Right Now?

T-Mobile, US, Inc. TMUS and AT&T T are dominant players in the telecommunications industry. Operating as one of the largest wireless service providers in North America, T-Mobile offers mobile voice, messaging and data services in the postpaid, prepaid and wholesale markets. Its business largely depends on its “Un-carrier Value Proposition,” which aims to enhance customer satisfaction by means of providing the latest products at cheaper rates and on uncomplicated terms and conditions.AT&T is also one of the largest wireless service providers in the country, and offers a broad range of communication and business solutions that include wireless, local exchange, long-distance, data/broadband and Internet, video, managed networking, wholesale and cloud-based services.With deep industry acumen, both AT&T and T-Mobile hold a strong foothold in the highly competitive U.S. telecom sector. Let us analyze in depth the competitive strengths and weaknesses of the companies to understand who is in a better position to maximize gains from the emerging market trends.The Case for TMUST-Mobile continues to boast a leadership position in the 5G market. The company’s 5G network covers 98% of Americans, or around 330 million people in the country. The company has witnessed industry-leading postpaid customer growth in the past few quarters. The company is actively improving its working capital management to boost free cash flow. Backed by such initiatives, the company is well-positioned to invest in growth initiatives and pay debt and dividends. However, the company operates in a highly competitive and saturated U.S. wireless market. It has multiple wireless competitors, some of which have greater resources than it has and compete for customers based principally on service or device offerings, price, network coverage and customer service. Intensifying competition with AT&T and Verizon Communications, Inc. VZ is impeding growth. To lure customers from competitors, T-Mobile has launched several low-priced service plans for consumers as well as small business entities. This is also creating a margin squeeze.The company is taking several initiatives to counter these challenges and gain a competitive edge in the industry. It has increased its investment to make its network infrastructure robust and resilient to minimize the possibility of network outages and disruptions. Moreover, in collaboration with Starlink, it is working to introduce direct-to-cell service to eliminate issues related to dead spots. The company is also working to expand its 5G offerings beyond legacy mobile connectivity services. It has joined forces with Disney Studios StudioLAB to enhance its movie production process and transform storytelling with industry-leading 5G technology. New York City has selected T-Mobile G standalone network to support various mission-critical operations, including public safety in the city. TMUS’ effort to open up new revenue-generating opportunities from its 5G portfolio will likely bring long-term benefits.The Case for AT&TAT&T is steadily investing in key areas of 5G and fiber and adjusting its business according to the evolving market scenario. Backed by improved international roaming, pricing actions and a transition to higher-priced unlimited plans, the company is witnessing healthy traction in its postpaid portfolio. The company is leveraging Ericsson technology to deploy a commercial-scale open radio access network (Open RAN) across the country to help build a more robust ecosystem of network infrastructure providers and suppliers. It will foster healthier competition among vendors, reducing dependence on a single manufacturer and will thwart security risks by avoiding reliance on non-U.S. vendors such as Huawei. This is likely to offer more flexibility, lower costs, and open up new opportunities to monetize the network.Edge computing solutions are increasingly gaining traction in autonomous vehicles, drones, and robotic production lines. AT&T’s multi-access Edge Compute solution leverages a software-defined network to effectively support low-latency, high-bandwidth applications and streamline management of data traffic. The company expects its cutting-edge solution to give it a competitive advantage in the emerging edge computing domain.However, fierce competition with Verizon and TMUS is hindering growth. In a saturated wireless market, the spectrum crunch has become a major issue in the U.S. telecom industry. Verizon’s various mix-and-match pricing in both wireless and home broadband plans is gaining popularity. Most of the carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet-protocol service providers. How Do Zacks Estimates Compare for TMUS & T?The Zacks Consensus Estimate for T-Mobile’s 2025 sales and EPS implies year-over-year growth of 5.91% and 9.27%, respectively. The EPS estimates have improved 1.44% over the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for AT&T’s 2025 sales indicates growth of 1.5% year over year, while EPS is projected to decline 8.52%. The EPS estimates have been trending southward over the past 60 days.Image Source: Zacks Investment ResearchPrice Performance & Valuation of TMUS & TOver the past year, T-Mobile has gained 48.7% compared with the industry’s growth of 35.8%. T has gained 60.8% over the same period.Image Source: Zacks Investment ResearchGoing by the price/earnings ratio, T-Mobile’s shares currently trade at 21.57 forward earnings, higher than 13.13 for AT&T.Image Source: Zacks Investment ResearchTMUS or T: Which is a Better Pick?T-Mobile carries a Zacks Rank #2 (Buy), while AT&T has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.AT&T’s strategy to enhance network infrastructure, Dividend Yield and focus on debt management are positives. Despite AT&T’s strong foothold in the wireless industry, T-Mobile has outperformed AT&T in terms of revenue and net income growth in recent quarters, backed by solid postpaid customer additions. T-Mobile’s innovation-driven approach, rapid 5G expansion, customer-oriented strategy and healthy cash flow generation are giving it a competitive edge. Upward estimate revision showcase growing investors' confidence. Owing to these factors, T-Mobile appears to be a better investment option at the moment.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AT&T Inc. (T): Free Stock Analysis Report Verizon Communications Inc. (VZ): Free Stock Analysis Report T-Mobile US, Inc. (TMUS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks