Executive Summary

T-Mobile US provides wireless services to consumers and businesses in the United States. Its economic quality hinges on its ability to attract and retain subscribers through network quality, pricing, and customer service. T-Mobile's competitive edge stems from its 5G network leadership and disruptive marketing, but it faces intense competition from Verizon and AT&T. Key risks include technological obsolescence, regulatory changes, and integration challenges from past mergers. The company's free cash flow allows for stock buybacks and debt reduction. T-Mobile's customer-obsessed mentality and "Un-carrier" image drive growth and brand loyalty. T-Mobile is a wireless telecom competing on price, network quality, and marketing innovation in a mature industry.

1. What They Sell and Who Buys

T-Mobile sells wireless voice, messaging, and data services, as well as wireless devices and accessories. Customers include individual consumers, small businesses, and large enterprises across the United States.

2. How They Make Money

Revenue is generated primarily from service revenue (monthly recurring charges for wireless plans) and equipment revenue (sales of phones and accessories). Service revenue constitutes the vast majority of total revenue.

3. Revenue Quality

Revenue is highly recurring due to the nature of monthly wireless contracts. Subscriber churn (the rate at which customers cancel their subscriptions) is a critical indicator of revenue quality. Low churn indicates high customer satisfaction and predictable future revenue.

4. Cost Structure

Major cost components include: cost of services (network operations, roaming charges), cost of equipment (handset subsidies), selling, general, and administrative expenses (marketing, customer care), and depreciation & amortization (network infrastructure).

5. Capital Intensity

The business is capital intensive, requiring ongoing investment in network infrastructure (cell towers, spectrum licenses, 5G equipment). Capital expenditures are a significant use of cash flow.

6. Growth Drivers

Growth is driven by: net subscriber additions, increased data consumption per subscriber, expansion of 5G network coverage, and penetration into new market segments (e.g., rural areas, enterprise solutions).

7. Competitive Edge

T-Mobile's competitive advantages include its 5G network leadership, "Un-carrier" brand image (focused on customer experience and challenging industry norms), and disruptive pricing strategies. Scale also provides some cost advantages.

8. Industry Structure and Position

The US wireless industry is an oligopoly, dominated by T-Mobile, Verizon, and AT&T. T-Mobile is the #2 player in terms of subscribers.

9. Unit Economics and Key KPIs

Key KPIs include: average revenue per user (ARPU), subscriber acquisition cost (SAC), churn rate, capital expenditure as a percentage of revenue, and free cash flow per share. Improved unit economics are a function of ARPU growth, churn reduction, and efficient capital spending.

10. Capital Allocation and Balance Sheet

T-Mobile allocates capital to: network investments, spectrum acquisitions, debt repayment, and share repurchases. The balance sheet carries a significant amount of debt, reflecting past spectrum purchases and acquisitions. The company has emphasized reducing debt to achieve an investment-grade credit rating.

11. Risks and Failure Modes

Key risks include: intense competition, technological obsolescence (e.g., future wireless standards), regulatory changes (e.g., net neutrality), cybersecurity threats, and macroeconomic downturns impacting consumer spending. Failure to maintain network superiority would erode competitive advantage.

12. Valuation and Expected Return Profile

The valuation hinges on free cash flow generation and growth prospects. The expected return profile depends on subscriber growth, ARPU expansion, and the effectiveness of capital allocation decisions.

13. Catalysts and Time Horizon

Potential catalysts include: continued 5G adoption, successful integration of past acquisitions, further debt reduction, and expansion into new markets. The investment time horizon should be long-term, reflecting the industry's dynamics and capital intensity.