T-Mobile or Verizon: Which Telecom Stock Is the Smarter Investment?
T-Mobile, US, Inc. TMUS and Verizon Communications Inc. VZ are prominent players in the telecommunications industry. Operating as one of the largest wireless network providers, Verizon offers communication services in the form of local phone service, long-distance, wireless and data services. It has an extensive 4G LTE network coverage and a steadily expanding 5G infrastructure with ultra-wideband deployment.
T-Mobile is also one of the largest wireless service providers in the country, and offers mobile voice, messaging and data services in the postpaid, prepaid and wholesale markets. Its business largely depends on its 'Un-carrier Value Proposition,' which aims to enhance customer satisfaction by means of providing the latest products at cheaper rates and on uncomplicated terms and conditions.
With deep industry expertise, both Verizon and T-Mobile hold a strong foothold in the highly competitive U.S. telecom sector. Let us analyze in depth the competitive strengths and weaknesses of the companies to understand who is in a better position to maximize gains from the emerging market trends.
The Case for Verizon
With one of the most efficient wireless networks in the United States, Verizon continues to deploy the technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. The company's 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells. It has expedited the expansion of fiber-optic networks to support 4G LTE and 5G wireless standards as well as wireline connections.
The company recently launched Verizon Frontline Network Slice in several markets nationwide. It will provide dedicated 5G ultra-wideband network capacity for frontline workers and first responders. Allocation of dedicated network resources for mission-critical communications will enhance reliability and responsiveness in public safety operations nationwide.
The company launched Verizon Business Assistant to support small business owners. The generative AI-powered solution comes with enticing features that streamline customer interactions. It provides an automated response capability that swiftly answers client queries. Its text messaging features are available 24/7. The use of familiar and convenient communication channels simplifies the interaction process for customers. Such initiatives and innovative product launches highlight Verizon's effort to diversify its revenue mix by expanding market reach. The company is also focusing on expanding into high-growth areas such as cloud, security and professional services, which augurs well for long-term growth.
However, the company is witnessing intense competition from T-Mobile and AT&T, Inc. T. In a bid to expand its customer base and beat the competition, Verizon is spending heavily on promotion and is also offering lucrative discounts, which are weighing on margins. Due to the ongoing shift from traditional linear video to over-the-top offerings, Verizon is witnessing a decline in Fios Video customers. Its wireline division is also facing headwind with persistent losses in access lines owing to competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data and video) offerings by cable companies.
The Case for T-Mobile
T-Mobile is witnessing healthy traction in the postpaid services. The company is steadily advancing its portfolio to match the most demanding use cases. It recently rolled out 5G advanced nationwide. The 5G advanced network integrates cutting-edge artificial intelligence and machine learning capabilities across the radio access network, core network and management layers. This will ensure real-time adaptability and optimum utilization of network resources.
The network has also been extended beyond legacy mobile services and efficiently supports diverse platforms, including wearables, IoT devices, industrial sensors, and smart infrastructure. It brings low latency, scalable throughput, which enables gaming, AR/VR, XR, video calls, and conferencing. It reduces lagging and buffering, enhancing the end-user experience. T-Mobile is the first wireless provider to reach 550 Mbps uplink speeds in sub-6 GHz spectrum using 5G Advanced network. The company's aggressive push for 5G expansion and enhancement in network infrastructure provides a competitive edge to the company.
However, the company operates in a highly competitive and saturated U.S. wireless market. Stiff competition with Verizon and AT&T, with a relatively fixed pool of customers, is putting pressure on pricing. AT&T's collaboration with Ericsson to upgrade its nationwide network infrastructure will further intensify the competition. To beat the competition, the company is heavily investing in network advancement and spending on promotional activities such as free music streaming and video offers. This is straining the operating margin.
Amid this backdrop, the company is taking several actions to diversify its business operations and open up new avenues of revenue generation. It has completed the acquisition of Blis, an innovative provider of privacy-centric advertising solutions, and Vistar Media, a leading provider of technology solutions for digital out-of-home advertisements. The integration of Vistar Media and Blis' advertising technologies will significantly strengthen T-Mobile Advertising Solutions' business. It has also recently acquired Lumos, which has significantly boosted T-Mobile's capability to serve underserved regions by accelerating the deployment of high-speed broadband. Such initiatives augur well for long-term growth.
How Do Zacks Estimates Compare for TMUS & VZ?
The Zacks Consensus Estimate for T-Mobile's 2025 sales and EPS implies year-over-year growth of 5.91% and 9.32%, respectively. The EPS estimate for 2025 has improved 1.44% over the past 60 days.
The Zacks Consensus Estimate for Verizon's 2025 sales indicates growth of 1.71% year over year, while EPS is projected to increase 2.18%. The EPS estimate has remained unchanged for the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of TMUS & VZ
Over the past year, T-Mobile has gained 45.4% compared with the industry 's growth of 34.4%. VZ has gained 9.7% over the same period.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, T-Mobile's shares currently trade at 21.24 forward earnings, higher than 9.2 for Verizon.
Image Source: Zacks Investment Research
TMUS or VZ: Which is a Better Pick?
T-Mobile and Verizon carry a Zacks Rank #3 (Hold) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Verizon's focus on upgrading network infrastructure, customer-focused planning and healthy dividend Yield are positives. However, T-Mobile's aggressive 5G expansion, strategic acquisition to expand portfolio offerings, efficient working capital management, and solid customer engagement in postpaid services are giving it a competitive edge. The company recorded impressive revenue and free cash flow growth, while Verizon is facing a bumpy road. Upward estimate revision showcases growing investors' confidence. Owing to these factors, T-Mobile appears to be a better investment option at the moment.
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