T-Mobile US (NASDAQ: TMUS) has been the darling of the telecom world, consistently outpacing its rivals, Verizon (VZ) and AT&T (T), with impressive revenue growth and a truly differentiated strategy. However, for investors considering the current share price of $228, the question isn't whether T-Mobile is performing well, but how much of that stellar performance is already reflected in its valuation.
According to a recent analysis by Moretus Research, while T-Mobile's multi-year growth drivers are undeniable, its current share price of around $228 already reflects much of its future potential. Moretus initiates coverage with a Hold rating and a $245 price target, suggesting that the risk/reward at current levels is neutral.
The T-Mobile Growth Story: Still Strong, Even Underrated by Some
T-Mobile's execution has been top-notch. They've consistently delivered on their promise of rapid 5G network expansion and customer acquisition. Moretus Research projects T-Mobile to hit $88.0 billion in revenue in FY25E and $93.7 billion in FY26E, surpassing Street consensus estimates (8.1% and 6.5% growth, respectively).
Several key factors drive this optimistic outlook:
- Strong ARPA Gains: T-Mobile is successfully "premiumising" its customer base, leading to higher average revenue per account (ARPA). Q1 FY25 saw a robust 3.5% postpaid ARPA growth, the strongest in eight years, fueled by premium rate plans.
- T-Fibre & T-Satellite: These new high-margin ventures are set to be significant revenue drivers. T-Fibre: Following the Lumos transaction, T-Mobile is poised to launch "T-Fibre," leveraging its brand and retail presence to capture demand, particularly among its mobile customers who are eager for better fixed broadband options. T-Satellite: With hundreds of thousands of beta users and a July commercial launch, T-Satellite (priced at $10/month, free with premium plans) is a differentiated offering supported by 550+ satellites.
- Underappreciated Upside: Moretus believes the market is largely overlooking the 1-1.5% point boost to ARPA and $1-1.5 billion in equipment revenue upside from the cross-selling of these new fibre and satellite products.
These new high-margin segments are expected to significantly improve T-Mobile's free cash flow (FCF) leverage in the coming years.
Tech Enablement: Opening the Network for Future Growth
Beyond just building a robust 5G network, T-Mobile is strategically opening up its network capabilities to developers, transforming telecom from a closed infrastructure into a programmable platform. This is a critical aspect of their reinvestment strategy, aiming to foster innovation and create new revenue streams.
GSMA Open Gateway: The Global Standard at the forefront of this movement is the GSMA Open Gateway initiative, a global effort to standardise Application Programming Interfaces (APIs) that give developers universal access to mobile operator networks. Launched in 2023, it aims to make network functions, including quality-on-demand (QoD), authentication, billing, and location services, universally accessible. With 67 mobile operators supporting it and 94 APIs commercially available in 21 countries, it's democratising network access.
- Example: Device Location API – A bank can use this API to verify a customer's location during a high-value transaction, flagging potential fraud if the location is unexpected.
- Real-world Implementation: Telefonica, a "local champion" for Open Gateway, integrated its QoD API with AWS to enable developers to request enhanced network performance for latency-sensitive applications like gaming, creating new service models.
T-Mobile’s DevEdge Platform: Your Gateway to Innovation T-Mobile's developer platform, DevEdge, operates in close collaboration with its parent company, Deutsche Telekom, and aligns with the GSMA Open Gateway vision. DevEdge provides developers with access to T-Mobile's network and service APIs, focusing on leveraging its 5G leadership. This includes OSS (Operational Support Systems) capabilities like 5G network slicing and Quality of Service (QoS), alongside potential BSS (Business Support Systems) integrations.
- Example: Quality on Demand (QoD) API – A gaming company can use DevEdge's QoD API to dynamically adjust network performance, ensuring ultra-low latency for multiplayer online games on T-Mobile’s 5G network, directly enhancing the player experience.
- Connecting BSS to Innovation: While primarily OSS-focused, DevEdge also facilitates BSS integration through Open Gateway APIs like "Carrier Billing – Check Out." This allows a streaming app, for instance, to enable direct billing to a customer's T-Mobile phone bill, simplifying payments and supporting T-Mobile's premium ARPU growth by leveraging its billing systems.
By providing these programmable interfaces, T-Mobile is not just selling connectivity; it's enabling an ecosystem of third-party innovation that can drive new applications, enhance existing services, and ultimately monetise its advanced 5G infrastructure more effectively.
The Competitive Landscape: A Shifting Battleground
Of course, Verizon and AT&T aren't simply bystanders. Verizon impressively added 900,000 postpaid phone net additions in Q4 2024, and AT&T saw a robust 1.7 million additions for the entire year. These are strong numbers, and they signal that the competition is indeed heating up. However, T-Mobile's strategic focus remains distinct. While competitors are playing catch-up in customer additions, T-Mobile is betting on future-proofing its business through continuous innovation and network expansion. Their 834,000 postpaid account additions for the first nine months of the year, while a slight slowdown from previous periods, still represent solid growth in a challenging market.
Growth vs. Dividends: What's Your Long-Term Play?
For many, the appeal of Verizon and AT&T lies in their reliable dividends. And for a steady income stream, that's a perfectly valid investment thesis. But for those with a longer-term horizon, T-Mobile's approach presents a compelling alternative. By prioritising reinvestment over immediate payouts, T-Mobile is cultivating sustained growth in customer base, network superiority, and, ultimately, shareholder returns.
Just look at the track record: Over the past five years, T-Mobile has delivered an annualised return of 22.19%, a stark contrast to the negative returns posted by AT&T and Verizon. Even over a decade, T-Mobile's 21.90% annualised return underscores the power of its reinvestment strategy.
The Valuation Conundrum: Growth Is Priced In
Despite this strong operational performance and future outlook, the analysis suggests that T-Mobile's current valuation already reflects much of this expected growth. Moretus applies an EV/Sales multiple of 4.15x on FY26E, which, while a slight step down from FY25E, is a significant premium to T-Mobile's historical median (3.4x) and the peer median (2.5x).
The premium is justified by T-Mobile's clear multi-year top-line and cash flow growth visibility, especially from the high-margin T-Fibre and T-Satellite businesses. However, it cautions that the stock price already discounts the lift from premium ARPA cohorts and these new connectivity adjacencies.
Headwinds: Capital Intensity & Tariff Risks
The road to further multiple expansion isn't entirely smooth. Two key headwinds could limit T-Mobile's ability to translate its operational momentum into outsized shareholder value:
- Elevated Capital Intensity: Deploying next-generation infrastructure, particularly for fibre and satellite, demands substantial upfront and ongoing capital expenditure. This high "capex intensity" can constrain FCF conversion.
- Tariff Headwinds: The risk of escalating tariffs on imported network equipment and consumer devices poses a clear threat to operating margins. In a competitive environment, T-Mobile may have limited ability to pass these costs directly to consumers.
These factors mean that even with stellar top-line growth, a significant portion of capital is allocated to growth initiatives, and potential cost increases could erode margins, limiting the likelihood of substantial multiple expansion.
Risks to the "Hold" Thesis
While Moretus Research assumes successful execution of T-Fibre, T-Satellite, and premiumization, two main risks could pressure their "Hold" rating:
- Increased Capital Intensity & Regulatory Volatility: Any unexpected increase in capex, or adverse regulatory actions (e.g., spectrum consolidation scrutiny, new tariffs, or inflationary shocks), could compress margins, drive price increases, or slow network expansion, impacting FCF leverage.
- Security Incidents: Despite ongoing investments, T-Mobile has faced multiple high-profile customer data breaches (2021-2024). Recurrences of operational or tech-control failures could harm customer trust, incur costly compliance burdens, or lead to future litigation, materially affecting both customer base and cost structure.
Conclusion: A Great Company, A Fair Valuation
In summary, T-Mobile US is indeed an industry leader with a best-in-class growth profile, driven by impressive ARPA trends and the exciting potential of T-Fibre and T-Satellite cross-sell. Management's execution and the potential for significant FCF leverage are undeniable differentiators.
Note on Telstra vs T-Mobile's 5G Monetisation Strategy
It's fascinating to see how major telcos like T-Mobile and Telstra are approaching network programmability and API exposure. Both are leveraging similar underlying technologies but with nuanced go-to-market and business strategies.
First, let's clarify the relationship between GSMA Open Gateway and CAMARA.
- CAMARA is an open-source project within the Linux Foundation, in collaboration with TM Forum. Its primary role is to define and specify the standardised network APIs. Think of it as the blueprint or the technical standards.
- GSMA Open Gateway is a global industry initiative that uses these CAMARA-defined APIs to provide universal access to mobile operator networks. It's the "umbrella" or the framework under which operators expose these standardised APIs. T-Mobile is a key participant in Open Gateway.
- Aduna is essentially a platform built using these CAMARA-based APIs to expose network capabilities from multiple telcos.
Now, let's break down the two strategies:
T-Mobile's Strategy: DevEdge leveraging GSMA Open Gateway
T-Mobile's approach is to build its DevEdge platform as its primary developer interface, operating within the larger GSMA Open Gateway framework. This means T-Mobile is exposing its network capabilities (both OSS and some BSS) via standardised CAMARA APIs through its dedicated portal.
Pros for T-Mobile:
- Direct Control & Branding: T-Mobile maintains direct control over its developer experience, branding, and monetisation model through DevEdge. This allows for specific product offerings tied directly to its 5G network capabilities (e.g., guaranteed QoD on T-Mobile's network).
- Leveraging 5G Leadership: They can directly showcase and monetise the unique capabilities of their "biggest and fastest 5G network" via APIs like Quality on Demand (QoD) for low-latency gaming or network slicing for enterprise applications.
- Specific Customer Focus: T-Mobile can tailor its API offerings and support to its existing and target enterprise customers, integrating deeply with their business processes.
- BSS Integration: DevEdge can integrate specific BSS APIs (like Carrier Billing or Number Verification) to enable direct monetisation and simplified transactions on T-Mobile's network, supporting their ARPU growth.
Cons for T-Mobile (from a purely isolated DevEdge perspective):
- Potentially Siloed: While part of Open Gateway, DevEdge's primary focus is T-Mobile's network. For developers needing multi-operator or international reach, they might still need to integrate with multiple operator-specific portals or aggregators.
- Requires Self-Driven Adoption: T-Mobile needs to actively market DevEdge and attract developers to their specific platform, rather than inherently benefiting from a larger, shared pool.
Go-to-Market & Business:
- Go-to-Market: T-Mobile primarily drives developers to its DevEdge portal directly, and also distributes APIs via cloud providers (AWS, Azure) and aggregators. The focus is on direct engagement with developers to build applications that specifically leverage T-Mobile's network.
- Business: The strategy aims to directly monetise T-Mobile's 5G network investment by enabling new premium services (e.g., enhanced gaming, IoT solutions, enterprise network slices) and leveraging its BSS capabilities for new revenue streams like carrier billing. It's about increasing ARPU and generating new service revenue directly from T-Mobile's assets.
Telstra's Strategy: Aduna based on CAMARA APIs with Multi-Telco Support
Telstra's Aduna initiative, notably supported by 14 telcos including T-Mobile, represents a more federated or collaborative approach from the outset. Aduna also uses CAMARA-based APIs, but the key difference lies in its scope: it's designed to be a multi-operator platform for network API exposure.
Pros for Telstra (and Aduna participants):
- Broader Ecosystem & Reach: By including 14 telcos, Aduna immediately offers developers access to network capabilities across a much wider geographical and customer footprint. This is crucial for applications that need to span multiple networks or even countries (e.g., global logistics, international gaming).
- Simplified Developer Experience (for multi-network apps): A developer only needs to integrate with Aduna's platform to potentially access services from 14 different operators, significantly reducing complexity compared to integrating with 14 individual operator portals.
- Accelerated Market Adoption: A shared platform can attract more developers faster due to the expanded market opportunity and simplified access.
- Reduced Individual Marketing Burden: While participants still promote their capabilities, the collective effort behind Aduna helps drive overall awareness and adoption of network APIs.
Cons for Telstra (and Aduna participants):
- Shared Control & Governance: Decision-making, feature prioritisation, and revenue sharing models might be more complex due to the involvement of multiple operators.
- Pace of Innovation: The speed at which new APIs or features are rolled out might be dictated by the slowest common denominator among the participating telcos, rather than by a single operator's agility.
- Less Direct Monetisation: While Telstra benefits from the overall ecosystem growth, directly attributing specific revenue to Telstra's network contribution within a multi-operator Aduna-enabled service might be more complex than on a purely T-Mobile DevEdge offering.
Go-to-Market & Business:
- Go-to-Market: Aduna is positioned as a unified gateway for developers to access network APIs from its participating telcos. The marketing would emphasise the seamless, multi-network reach.
- Business: The strategy aims to unlock new business models that require interoperability across multiple networks. It's about growing the overall pie of network-enabled applications and services, from which Telstra (and other participants) would derive revenue. This could involve revenue sharing from applications that leverage their network segment, or attracting large enterprises seeking consistent service across global operations.
In essence, T-Mobile's DevEdge is like building a premium, branded store within a large global marketplace (Open Gateway), focusing on selling products from their farm. Telstra's Aduna, on the other hand, is trying to build a new, integrated distribution hub for products from multiple farms (including T-Mobile's), aiming to create completely new types of composite goods that wouldn't be possible from just one farm. T-Mobile's involvement in Aduna shows they understand the need for both: direct monetisation of their leading network and participation in a broader, interoperable future.
Updated Note on Telstra and Nokia's partnership to unlock Network API's, Jun 17, 2025
Telstra's recent announcement with Nokia for its muru-D Labs developer portal marks a strategic pivot towards localising network API exposure, echoing T-Mobile's successful DevEdge strategy in the US. While Aduna focuses on aggregating standardised mobile network APIs for global reach, Telstra's Nokia partnership enables the Australian telco to directly engage local enterprises and developers with Telstra-specific network capabilities for immediate, high-value use cases within Australia. This allows Telstra to cultivate its ecosystem of applications tailored to the unique needs of the Australian market.
A key differentiator for Telstra's Nokia platform is its ability to expose APIs from both mobile and fixed access networks. Aduna, whilst powerful for global mobile APIs, primarily emphasises mobile network capabilities. Telstra's access to Nokia's service orchestration software, already deployed across its network infrastructure, allows it to offer a broader range of programmable network services. This caters to diverse industry needs, from optimising fixed-line connectivity for smart buildings to enhancing network observability for large-scale events that rely on both mobile and fixed infrastructure.
This localised, multi-access approach aligns with the "T-Mobile DevEdge" model, where T-Mobile directly exposes its network APIs to foster innovation for specific US use cases, building a direct relationship with its developer community.
Use Case Example: Smart City Traffic Management in Melbourne
- Telstra & Nokia (Local Reach, Mobile & Fixed): The City of Melbourne could use Telstra's APIs (via Nokia's platform) to dynamically adjust traffic light timings based on real-time mobile network congestion data (e.g., cell tower load in specific areas) and fixed sensor data from traffic cameras connected via Telstra's fibre. This allows for immediate, hyper-local optimisation within Melbourne's specific network environment. They could also use QoS APIs to prioritise emergency vehicle communications during critical incidents across both mobile and fixed networks.
- Aduna (Global Reach, Mobile Focus): An international rideshare company might use Aduna's global Location Verification API to authenticate users or prevent fraud across multiple countries, including Australia. However, for highly localised, real-time traffic management deeply integrated with Telstra's specific fixed and mobile infrastructure within Melbourne, direct engagement with Telstra's Nokia-powered platform provides the necessary granularity and control. Telstra's recent announcement with Nokia for its muru-D Labs developer portal signals a deliberate shift towards a more localised approach to exposing network APIs, taking a leaf out of T-Mobile's DevEdge playbook. Whilst Aduna is geared towards aggregating standardised mobile network APIs for global reach, Telstra's partnership with Nokia allows the Australian telecoms firm to directly engage UK-based enterprises and developers. This offers immediate, high-value use cases specifically for the UK market, enabling Telstra to nurture its ecosystem of applications tailored to local requirements.
To know more about the Australian Telecommunications Industry and its Evolution, please refer to my book titled Australia's NBN Debacle.
Source: Chatgpt, Claude, Gemini, AFR, T-Mobile, Telstra, Bloomberg, Forbes, Economist, Times, Wired, SeekingAlpha, Telecoms TV, TM Forum, CIO, my Blog
Related post - Telstra's Transformation 2025 - Investor Perspective, The Telecommunications Industry Decentralisation Model: Unbundling for the Digital Age
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