Wolfe Research cuts T-Mobile as revenue growth forecast risk tilts negative

Investing.com -- Wolfe Research downgraded T-Mobile US to Peer Perform from Outperform on Friday, saying the carrier faces mounting competitive pressure in its core market alongside a capital spending cycle that could weigh on shareholder returns.

"Long-term revenue growth forecast risk tilts negatively as competition expands in T-Mo's core," analyst Peter Supino wrote, adding that "Broadband and 6G investments could dampen capital returns and pressure leverage."

The firm said the bull case rests on T-Mobile being the most dynamic company in telecom, offering consumers the best value and carrying no drag from shrinking legacy phone businesses.

But Wolfe Research argued that case now faces pressure from several directions. AT&T and Verizon have sharply improved their offers to price-driven postpaid subscribers, a segment the firm said T-Mobile has dominated, while cable operators are pushing larger device promotions and Starlink's v3 expansion could cut into fixed wireless access growth.

Supino also flagged management departures and reports that Deutsche Telekom is seeking to merge T-Mobile into the parent, saying these raise concerns about alignment of interests.

The firm expects slower ARPU growth as pricing actions on legacy plans narrow the gap between back-book and front-book pricing, and sees core growth at AT&T and Verizon converging toward T-Mobile's over the next four years.

On capital allocation, Wolfe Research pointed to CEO Srini Gopalan's comments about "doubling-down" on network superiority, taking it to mean spending will likely exceed the $20 billion of flexible capacity in long-term guidance. The firm said T-Mobile's historical valuation premium should narrow.

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