T-Mobile Purchases Cavalier Wireless and C700's 700mHz Spectrum

Cavalier Wireless and Continuum 700 have both owned this spectrum sense the original auction. This spectrum acquisition continues to expand T-Mobile's portfolio of low band spectrum. We expect that T-Mobile will continue to buy up spectrum spectators like Cavalier and Continuum over the next 12 months.  The purchase price of the spectrum is approximately $700 million.

Cavalier's Spectrum

  • Albany-Schenectady-Troy, N.Y.
  • Syracuse, N.Y.
  • Buffalo-Niagara Falls, N.Y.
  • State College, Penn.
  • Harrisburg-Lebanon-Carlisle, Penn.
  • Staunton, Va.
  • Greensboro-Winston-Salem-High Point, N.C.
  • Fayetteville, N.C.
  • Charlotte-Gastonia-Rock Hill, N.C.
  • Columbia, S.C.
  • Augusta, Ga.-Aiken, S.C.
  • Tallahassee, Fla.
  • Albany, Ga.
  • Greenville-Spartanburg-Anderson, S.C.-N.C.
  • Lexington, Ky.
  • Toledo, Ohio
  • Louisville, Ky.-Ind.
  • Beaumont-Port Arthur, Texas
  • Corpus Christi, Texas
  • McAllen-Edinburg-Mission, Texas
  • Spokane, Wash.-Idaho
  • Honolulu, Hawaii

Continuum 700's Spectrum

  • Richmond-Petersburg, Va.
  • Charleston-North Charleston, S.C.
  • Savannah, Ga.-S.C.
  • Jacksonville, Fla.-Ga.
  • Fort Myers-Cape Coral, Fla.
  • Sarasota-Bradenton, Fla.
  • Columbus, Ohio
  • Boise City, Idaho-Ore.
  • Salt Lake City-Ogden, Utah-Idaho
  • Albuquerque, N.M-Ariz.

T-Mobile Coverage Update (Dish + T-Mobile)

Tomorrow will be filled with buzz about the potential T-Mobile + Dish. This potential merger (We think it will happen, and it will be welcomed and approved by the FCC) will be huge for both T-Mobile and Dish. Dish owns a tremendous amount of spectrum and hasn't done much with it, if only there were a company rapidly and efficiently deploying LTE nationwide to help out? 

T-Mobile is growing incredibly fast, we estimate 2.4M net adds in Q2, they have 286 million POPs of LTE and are growing everyday. In fact, every week we notice first hand improvements with the network and consistently breakneck speeds. Unfortunately because T-Mobile is investing so much in there towers, they don't have huge mounds of cash like dumb and dumber (Thats for you John). Having a partner like Dish would provide them with tremendous amounts of spectrum (Valued at $25 billion by Barron's and is about 50mHz) and in turn allowing them to have an even greater data capacity and a larger network. Dish owns a variety of spectrum but majority is in the 700mHz and 1900-2000 mHz which is good for T-Mobile since they deploy spectrum very close to that. 

So what is in this deal for Dish? Simply, T-Mobile could provide great cash flow in the future as it grows. But having a partner to bundle unique services could be very helpful for Dish (See Verizon and Frontier's partnership). John Legere has dropped hints that he wants to enter the home internet market and Dish would be able to expand their Dishnet with T-Mobile's network (And competitive high speeds). 

What terms should you expect? 

  •  Dish and T-Mobile under ticker TMUS
  • John Legere will be CEO and company name is T-Mobile (John has said he and the name will stay) This is the only way we support the deal- John Legere is T-Mobile's best asset
  • Deutsche Telecom (TMUS Parent) will sell a majority of its shares
  • Combined value will be $70 Billion

What should happen?

Both companies will accelerate their growth (Especially T-Mobile) and in turn investors will see value in this merger/acquisition.

Targets:

$50 Target                           BUY

Revised Coverage: T-Mobile USA

Un-carrier 9.0: Revolutionizing wireless for business. This announcement shakes up the wireless industry once again. This new area of expansion is an excellent opportunity for T-Mobile to continue and accelerate their current growth. Wireless business accounts generate about $83 Billion in revenue yearly. Currently T-Mobile has about a 3% share of the sector.

We are expecting T-Mobile to grow that share to 15% by year end or an increase of $12.45 Billion in revenue. That alone would affectively grow their revenue YOY by 42%. For the business sector we expect the ABPU (Average Billings Per User) to be about $45, which is slightly lower than their consumer ABPU. 

We are expecting in addition to the business sector growth, growth of about $3.3 Billion from general customers. In total revenue growth could reach $15.75 Billion or a gain of 53.2%. T-Mobile should see Excellent margin growth to about 35% EBITDA, and total revenue of $45.3 billion. 

The implied potential growth T-Mobile has allows us to raise our price target to $50 per share. T-Mobile will once again dominate the competition in 2015 and we are curious to see competitors responses. 

 

Initiating coverage T-Mobile USA (TMUS)

Since late 2013, T-Mobile has been known as the fastest growing wireless carrier. In 2014 T-Mobile added 8.3 million net customers rising to a total of 55 million customers. This growth outpaces competitors significantly and proves that John Legere's "Un-carrier" movements are working. 

By the end of 2015, T-Mobile will have coverage compatible to AT&T(T) and Verizon(VZ). The "Data Strong" network will reach over 300 million people. We expect this expanded network to exceed current customers needs and allow T-Mobile to gain more customers particularly from Sprint(S). T-Mobile's network already exceeds competitors in terms of speed and nearly doubles Sprint in terms of average download speed. Network coverage and speed are customers main focus, as T-Mobile expands their network, customers will come. 

Because of T-Mobile's network growth and "Un-carrier" movements we expect T-Mobile to net add 5-6 million customers (Far above guidance). This will allow T-Mobile to jump far ahead of Sprint and inch closer to juggernauts AT&T and Verizon. We are initiating coverage at Outperform and a target of $45 per share.