Why T-Mobile’s Stock Won’t Jump

Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T) and T-Mobile US Inc. (NASDAQ: TMUS) all have commercials showing that one or the other wins in voice calls, text, download speed and other measures that might be important to consumers. The winner depends on which company runs the best commercial. In the stock price race, T-Mobile gets battered.

So far this year, T-Mobile shares are down 5.8%. Verizon’s shares are higher by 9%, which puts it among the best performers among the Dow components. AT&T’s shares are up 6.5%. The spread among the companies is about the same over the past three months.

T-Mobile posted knock-out earnings. In the fourth quarter, the company added 2.1 million subscribers, which puts its year-end total at 63 million. Net income for the period hit $297 million, up from $101 million in the fourth quarter of 2014.

Yet, the company has two problems. The first is that, even with growth, T-Mobile sits well behind AT&T and Verizon in total subscribers. More importantly, the two larger companies are in multiple businesses, particularly fiber to the home and traditional landline segments. They are companies that are, as business professors call them, multi-legged stools.
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The eventual fate of T-Mobile is in question. The company is majority owned by German giant Deutsche Telekom — 66% of the common stock. DT controls T-Mobile’s fate, which includes its ability to spend money to increase its network. T-Mobile may be an asset DT does not want to keep. That puts a high level of risk in T-Mobile’s future.

No one can question the impressive growth T-Mobile has posted. It is the lingering challenges that concern investors.