T-Mobile's Solid Results Still Overshadowed By Merger Uncertainty

Reaction to T-Mobile Us Inc's TMUS reported industry leading revenue growth and phone subscriber adds was muted Tuesday by ongoing uncertainty over the the proposed merger with Sprint Corp S, and awaiting an expected early November announcement on the company's next big move.

The company's third-quarter results were solid, with its addition of more than 1.7 million new net customers and EBITDA beating Street estimates by 4%.

'Disciplined Approach'

UBS analyst John Hodulik kept a Buy rating and $96 target price on the stock.

"The company continues to take a disciplined approach to customer acquisition amid churn improvement," Hodulik wrote in a note. "Growth continues to be driven by adds in underpenetrated markets."

Hodulik noted that T-Mobile management said Monday it expects the Sprint merger to close early next year.

But, the litigation and other uncertainties around the deal may be keeping some from being more upbeat.

“These (quarterly) results continue to be somewhat overshadowed by the deal uncertainty," Morgan Stanley’s Simon Flannery said in a note on T-Mobile, though he doesn’t have a rating or price target on the stock.

Legere Optimistic

T-Mobile CEO John Legere said on the third-quarter conference call the company is still in talks with the states around their concerns about the merger, with talk focusing on buildout of 5G infrastructure, pricing and competition the issues under discussion. Legere said he remains optimistic about a settlement, and an early 2020 merger completion.

Both Hodulik and Flannery expressed interest, however, in T-Mobile’s plans for a “New T-Mobile Uncarrier 1.0,” which Legere said the company will explain in a Nov. 7 announcement.

Price Action

T-Mobile shares were trading down 0.8% at $81.72 on Tuesday.

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