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1、FOCUSU.S.Cable,Satellite&TelecomServicesDish/NewTMUS:WheredowegoINDUSTRYUPDATEEquityResearch9March2020fromhere?WiththeTMUS/Sdealgettingclosetoadefinitiveclose,investorfocushasturnedtowardsthreeareasthatweconsiderinmoredetail:(a)competitivedynamicsinUSwireless;(b)earningspath
2、forNewT-Mobile;and(c)valuecreationpotentialatDish.Competitivedynamics:Contrarytoconsensusopinionatthetime,weflaggedthepossibilityoftheS/TMUSdealbeingastructuralnegativeforthesectorinlate2018(pleaseseeS/TMUS:Marketrepaircouldprovetobeachimera,Nov29,2018fordetails).Basedonourcon
3、versationswithinvestors,thisnowappearstobetheprevailingconsensus.However,thisprocessisunlikelytobelinearandwillplayoutinacoupleofdifferentphases.Theremayalsobegrowingstructuralconcernsaroundthewirelessindustrygiventhecreationofanewplayer(Dish)andexcesscapacityatthreeofthefouro
4、peratorsintheindustry(TMUS,AT&TandDish).NewTMUSearningspath:BasedonTMUS’sguidance,costtoachievesynergiesanddeteriorationinSprintfundamentalssincedealannouncement,NewTMUSearningsgrowthislikelytoslowmeaningfullyoverthenext2-3years.Inaddition,accountingdifferencesbetweenthetwomig
5、hthurtnear-termestimates.ThecompanyalsohasanewCEOandCFO,whichmaycreatesomemotivationtore-basenear-termestimatesfurther.Competitively,theenablementofDishandthetransitionofSprintsubsanduniteconomicstoTMUS’smodelcouldalsoaddtonear-termoperationalvolatility.Whilewerecognizetheseri
6、sks,webelievethestockismorethanadequatelypricinginthesevariablesat~6.6x2025PFEBITDApresentvalued,ameaningfuldiscounttoAT&TandVZ(~7.2and~7xrespectively2021E).PFTMUSgrowthbetween2021-25islikelytobeinthedouble-digitsforEBITDAand25%+forFCF,significantlyfasterthananycableorwireless
7、distributorintheUS,andtherecouldbefurtherupsidevs.ourlong-termnumberswhichcouldmakeimpliedvaluationevencheaper.WeincreaseourTMUSPTto$94onhigherestimatesanddealprobability,andsimilarlyincreaseSprint’sPTto$9.Dishvaluecreationpotential:Wemovefromaspectrum-basedvaluationmethodolog
8、yforDishtoaframeworkbasedonpotentialearningspowerofitsnewwire