T-Mobile Analyst Reacts Positively To Ka'ena Acquisition And Other Positive Catalysts

Benchmark analyst Matthew Harrigan reiterates T-Mobile US Inc TMUS with a Buy and a $197 price target. On Wednesday, T-Mobile agreed to acquire Ka'ena Corporation and its underlying brands, namely the Mint Mobile D2C prepaid wireless brand, Ultra Mobile, offering international calling options, and wholesaler Plum.

T-Mobile will pay a maximum of $1.35 billion in a blend of 39% cash and 61% stock to acquire Ka'ena, with the final price performance dependent. The deal should be mildly accretive to core adjusted EBITDA and Free Cash Flow as T-Mobile takes in the full long-term economics of Ka'ena, including benefits beyond the current wholesale exclusivity period. 

Benchmark views the transaction positively, although it is immaterial to stock price upside if not to the net worth of Ryan Reynolds, who will likely own 20% - 25% of Mint. 

Mint will retain "Deadpool" as its quirky pitchman and $15 per month pricing while generally operating as a distinct unit. 

T-Mobile continues to behave as a relatively safe haven. T-Mobile's ARPA/ARPU growth strategy relies on self-selection upselling to Magenta Max rather than pricing. 

TMUS's mega-cap status also provides some insulation to the softening consumer and macro headwinds further exacerbated by the SVB Financial Group SIVB Silicon Valley Bank black swan event.

Beyond reiterating that 60% of the smartphones on T-Mobile's network are 5G capable, with 70% of network traffic now 5G, retiring President of Technology Neville Ray made two significant new announcements at the 2023 Mobile World Congress.

Working with Ericsson ERIC, Nokia Corp NOK, Qualcomm Inc QCOM, and Samsung Electronics Co, Ltd SSNLF, T-Mobile completed the first four-carrier aggregation 5G data call on a commercial device. 

Combining four channels of mid-band spectrum enabled a 5G pipe delivering peak speeds north of 3.3 Gbps. T-Mobile is now working with vendors on six and soon seven-layer carrier aggregation. 

T-Mobile also expanded voice over 5G (VoNR) to four new markets, Cincinnati, New Orleans, New York, and Seattle, with 100 million people to cover for VoNR over the next few months. VoNR takes the entirety of voice to a 5G layer.

Price Action: TMUS shares traded lower by 1.86% at $141.74 on the last check Thursday.

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