T-Mobile US, Inc. (TMUS) stock intrinsic value fair value estimate & owner earnings analysis

T-Mobile US is the second-largest US wireless carrier. It sells monthly phone plans to consumers and businesses, prepaid service, and 5G home internet over its wireless network. It also sells fiber broadband through joint ventures: Lumos and Metronet, plus GoNetspeed/Greenlight and i3 Broadband, both announced in April 2026. It finances customers' phones on installment plans. In August 2025 it bought UScellular's wireless business for $2.8 billion in cash plus assumed debt. Deutsche Telekom owns about 53% of the shares and controls the company. This analysis takes a deliberately conservative view. The base case assumes T-Mobile's cash earnings never grow again in dollar terms, which means they shrink after inflation. Only the bull case gets any value from future growth. How we measure earnings. We start from the cash the business generates from operations. From that we take out swings in working capital, stock-based pay, bad debts on customer bills, and all network capital spending, including equipment paid for through finance leases. Unlike our earlier analyses, we treat all of that spending as the cost of keeping the network where it is. None of it counts as growth investment, because most of 2025's revenue gain came from buying UScellular and from price increases, not from new network build. On that basis, T-Mobile generated about $17.0 billion in 2024 and $17.5 billion in 2025 before income taxes. It paid almost no tax in those years ($179 million and $451 million). The first half of 2026 ran about 7% ahead of the first half of 2025, helped by a full period of UScellular. We restate for today's higher interest bill and use a starting level of $18.0 billion a year before tax. That is below the first-half 2026 pace of about $18.7 billion for three reasons: bad debts rose 40% from a year earlier, T-Mobile expects account additions to slow to about 250,000 in the third quarter, and churn is rising as customers move off older plans. From $18.0 billion to what owners keep. Five charges bring this down to about $12.0 billion a year, or $11.20 per share: - Taxes of about $3.5 billion a year. T-Mobile's Sprint-era tax losses are nearly used up: their tax value fell from $3.8 billion to $2.5 billion during 2025. The company says it will be a full cash taxpayer by 2027. We use about $3.0 billion for the next twelve months. - Higher interest, rising to $0.5 billion a year above today's level. Debt was $86.9 billion in June 2026. New bonds cost 5.0% to 5.85%, against roughly 4.5% on the existing debt. - Spectrum: $1.0 billion a year, plus $2.5 billion in each of the next two years for the Upper C-band and 2.7 GHz auctions, for which management says it is holding capital in reserve. Data traffic keeps rising even when customer counts don't, so buying spectrum is partly an upkeep cost for a carrier. - Working capital of $0.5 billion a year. After adjusting for how T-Mobile sold customer receivables, working capital absorbed $2.2 billion to $3.0 billion of cash in each year from 2023 to 2025. Most of that funded growth, but not all of it, since phones keep getting more expensive. - The next network generation: $0.5 billion a year from year four onward. This spreads across the cycle the extra spending that each past wireless generation required. We also charge the $3.2 billion T-Mobile has committed to new fiber ventures: $0.7 billion for i3 Broadband, $2.0 billion for GoNetspeed/Greenlight in 2027, and about $0.5 billion to Lumos in 2027-2028. We give no credit for any return on that money. We also give no separate value to the $5.5 billion already invested in Lumos and Metronet. Base case ($183 per share). Earnings start at $18.0 billion before tax and never grow, less the charges above. Cash to owners is about $10.7 billion in the next year and $10.6 billion to $11.1 billion in each of the two years after, while auction and fiber payments are made. From then on it is about $12.0 billion a year forever, discounted at 6%. This is not a forecast that T-Mobile will stop growing; service revenue rose 9% in the latest quarter. It is a refusal to pay for growth that has not happened yet. With 1% annual growth after year ten, this case would be about $209. Bear case ($106 per share). Competition slowly erodes the business. Earnings start at $17.0 billion before tax, which is the 2025 business at today's interest cost with no credit for recent improvement. They shrink 1% a year for ten years and 1.5% a year after that. The named pressures: - Cable companies and a revived AT&T are taking many of the new phone lines. In the second quarter of 2026, Comcast added 448,000, Charter 406,000 and AT&T 432,000, its best in years. - T-Mobile's own account additions fell 13% in that quarter. - Bad debts rose from $898 million in 2023 to $1.37 billion in 2025, then another 40% in the first half of 2026. - SpaceX, which paid roughly $20 billion for EchoStar spectrum in 2025, plans to launch its own mobile service from 2027 using new satellites and low-cost ground stations. In this case taxes run at a higher rate, refinancing adds $1.0 billion a year of interest, and spectrum costs $3.5 billion in each auction year and $1.5 billion a year after that. Working capital takes $1.0 billion a year, and the next network generation another $1.0 billion. Even so, the business still sends about $8 billion to $9 billion a year to owners in the first decade, and the debt stays serviceable. It becomes a shrinking, heavily indebted utility, not a failing one. Bull case ($247 per share). Earnings start at the first-half 2026 pace of $18.7 billion. They grow 2% a year for five years and 1% a year for five more, then stop growing. The growth comes only from levers already in motion: - the rate-plan changes that began in July 2026 - the remaining UScellular cost savings - more than 4,500 job cuts in 2026 as customer care is automated. In this case, taxes stay a little lower because network equipment can be fully expensed. Spectrum costs $1.5 billion in each auction year and $0.6 billion a year after that, and the fiber investments earn back what they cost. What changed since our previous analysis. We previously valued the shares at $331 in the base case. Almost all of the difference is growth. That analysis had pre-tax earnings growing 5% a year near term, 2.5% a year through year ten and 1% a year forever. This one assumes no growth at all in the base case. We also now treat all network capital spending as upkeep, and we measure the starting level at today's higher interest cost. Partly offsetting these, we charge less for spectrum, fiber and customer receivables, because a business that isn't growing needs less of that spending. Accounting judgements. Amortization of acquired customer relationships, about $1 billion a year, is added back, because the ongoing cost of winning customers already runs through earnings. We do not subtract debt separately, because the earnings above are measured after interest; debt shows up in the bear case instead. We use normal cash taxes rather than the unusually low taxes of recent years. We do not add the $2.9 billion received in August 2026 from selling 800 MHz spectrum to Grain Management. What could make this wrong. On the downside, if pressure from cable companies and a SpaceX service forces lasting price cuts, earnings could fall faster than in the bear case. Deutsche Telekom has explored combining with T-Mobile in an all-share deal through a new holding company. T-Mobile's management withdrew its support in August 2026 and the deal needs broad shareholder approval. Either way, minority shareholders have little say over capital allocation. Since the end of 2025, T-Mobile has reported only account additions, not phone-line additions, which makes it harder to compare its performance with rivals. On the upside, the base case gives no credit to a company that has out-grown its rivals for a decade. If T-Mobile simply keeps raising prices in line with inflation, the base case is too low.