T-Mobile Earnings: Coming Price Adjustments Should Benefit Cash Flow; Fiber JV Doesn’t Change Much

T-Mobile's first-quarter results provided further evidence that competition in the US wireless industry remains rational. The firm increased expectations for 2024 profitability and free cash flow while leaving its postpaid phone customer forecast unchanged, despite starting the year off well. Management expects customer growth to slow over the next couple of quarters as it begins implementing "rate plan optimizations," and it now expects average revenue per postpaid account to grow about 3% during 2024 rather than 2%. T-Mobile also agreed to enter the fiber network business, investing $1.5 billion through 2028 for a 50% stake in Lumos, a private telecom firm serving the Carolinas and Virginia, with plans to reach 3.5 million homes. The move fits with management's stated strategy to invest selectively in fiber, but it also only addresses a tiny sliver of the country and doesn't alter our view of the firm. Our T-Mobile fair value estimate remains $175.