Verizon vs. T-Mobile: Which Telecom Stock Should You Bet On?

Verizon Communications Inc. VZ and T-Mobile, US, Inc. TMUS are both major players in the U.S. telecom industry. Operating as one of the largest wireless network providers, Verizon offers communication services in the form of local phone service, long-distance, wireless and data services. It has an extensive 4G LTE network coverage and a steadily expanding 5G infrastructure with ultra-wideband deployment. T-Mobile, another telecom giant, offers mobile voice, messaging and data services in the postpaid, prepaid and wholesale markets.Growing usage of high data-intensive applications such as video streaming, gaming, AR and VR applications, growing usage of IoT devices in both consumer and industrial setups, are propelling growth in the U.S. telecom industry. The government initiative to bridge the digital divide by expanding network infrastructure in rural and remote areas of the country is also driving growth. Per a report from Grand View Research, the U.S. telecom market is expected to witness a compound annual growth rate of 6.6% from 2024 to 2030.With deep industry expertise, both Verizon and T-Mobile hold a strong foothold in the highly competitive U.S. telecom sector. Let us analyze the competitive strengths and weaknesses of the companies in depth to understand which is better positioned to maximize gains from the emerging market trends.The Case for VerizonVerizon is benefiting from solid demand trends in the Consumer segment. Its consumer wireless service revenue increased to $17.4 billion in the second quarter, up 2.3% year over year. The consumer wireless retail postpaid churn was 1.12% while the retail wireless postpaid phone churn was 0.9%. Consumer wireless postpaid average revenues per account rose 2.3% year over year to $147.5.Consumer wireless retail prepaid demonstrated solid improvement during the second quarter. Wireless retail core prepaid net additions were 50,000 in the second quarter compared to a net loss of 12,000 in the year-ago quarter.The company also registered solid broadband growth with total fixed wireless access net additions of 278,000, growing the subscriber base to more than 5.1 million. Verizon delivered 293,000 broadband net additions in the quarter. The company is steadily expanding its fiber broadband infrastructure. Its acquisition of Frontier Communications is accelerating the expansion of Verizon’s fiber Internet services nationwide.However, the company is facing stiff competition from other major players in the industry, such as AT&T, Inc. T and T-Mobile.  AT&T is actively expanding its fiber footprint nationwide with a multi-dimensional approach that includes strategic buyouts, partnerships with other industry leaders and enhancing its existing network infrastructure. AT&T’s acquisition of Lumen’s fiber business will significantly boost its fiber portfolio, and this can pose a threat to Verizon’s fiber expansion initiative.Amid stiff competition in the U.S. telecom market, Verizon is actively looking to venture into new markets to open up new avenues of revenue generation. Verizon Frontline is gaining traction in the public safety space. Recently, the Tampa Police Department has joined forces with Verizon to deploy around 950 5G Ultra-Wideband-enabled smartphones to upgrade the mission-critical communication system of the police force.The Case for T-MobileT-Mobile is benefiting from industry-leading postpaid customer growth. During the quarter, TMUS added 1.7 million postpaid net customers and 318,000 postpaid net accounts. Postpaid phone net customer additions were 830,000. The postpaid phone churn rate was 0.9%. 5G broadband net customer additions were 454,000. Postpaid average revenues per account rose to $149.87 from $142.54 in the year-ago quarter. Prepaid net customer addition was 39,000, with a churn rate of 2.65%. The company is broadening its portfolio to meet the requirements for the most demanding use cases. The company has expanded its network’s capability beyond legacy mobile services, supporting various emerging use cases, including wearables, IoT devices, industrial sensors and smart infrastructure. The company is expanding the 5G coverage of T-Priority, its flagship product for first responders and public safety officials. Efforts to expand into new markets to open up new revenue streams are positive.T-Mobile recently completed the acquisition of U.S. Cellular’s wireless operations. The acquisition has enabled TMUS to expand both its fast-growing home broadband offerings and fixed wireless products through the additional capacity and coverage from the combined spectrum and wireless assets.However, the U.S. wireless market is highly competitive and saturated. T-Mobile has multiple wireless competitors, some of which have greater resources than it does. Despite several advancements in network infrastructure and solid user growth in recent quarters, T-Mobile is still lagging behind its main rival, Verizon Wireless. Intensifying competition with a relatively fixed pool of customers is putting pressure on pricing. From a valuation standpoint, TMUS appears to be trading at a premium relative to the industry.How Do Zacks Estimates Compare for VZ & TMUS?The Zacks Consensus Estimate for Verizon’s 2025 sales indicates growth of 2.51% year over year, while EPS is projected to increase 2.4%. The EPS estimate has moved upward for the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for T-Mobile’s 2025 sales and EPS implies year-over-year growth of 6.48% and 9.83%, respectively. The EPS estimate for 2025 has improved 0.19% over the past 60 days, while for 2026 it has declined 0.57%.Image Source: Zacks Investment ResearchPrice Performance & Valuation of TMUS & VZT-Mobile has gained 8.6% year to date compared with the industry’s growth of 13.6%. VZ has gained 9.7% over the same period.Image Source: Zacks Investment ResearchGoing by the price/earnings ratio, T-Mobile’s shares currently trade at 20.33 forward earnings, higher than 9.01 for Verizon.Image Source: Zacks Investment ResearchTMUS or VZ: Which is a Better Pick?T-Mobile and Verizon carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Both companies are steadily expanding their network infrastructure to gain a firmer footing in the U.S. telecom sector. Despite solid demand for postpaid services, premium valuation and high prepaid churn are concerns for TMUS. Verizon’s strong focus on fiber expansion and solid momentum in the wireless vertical are positive factors. Upward estimate revision showcases growing investors’ confidence in Verizon’s stock. With a larger customer base and a comprehensive network infrastructure, Verizon appears to be a better investment option at present.See our %%CTA_TEXT%% report – free today!7 Best Stocks for the Next 30 DaysWant 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