U Mobile's Capital Expenditure Expected to Surge Amid 5G Rollout

U Mobile's capital expenditure (capex) is expected to surge from FY25 to FY27 due to the rollout of its second 5G network. CIMB Research notes that funding should not be a concern, as the company will leverage vendor financing and bank loans to support increased capex requirements. Despite a core net loss in FY24, U Mobile's net debt has fallen 3% y-o-y to RM2.7bil, and its capex has remained modest at 5.1% of sales.

T-Mobile US has recently extended its debt financing offers and completed a significant network expansion in Florida, underscoring its commitment to 5G capabilities and community engagement. Concurrently, Ultra Mobile, a subsidiary of T-Mobile, has enhanced its wireless plans, improving data and coverage without price increases. These initiatives have contributed to a 5% rise in T-Mobile's stock over the past week, outperforming the broader market's 3% increase [1].

T-Mobile's strategic moves align with its growth narrative centered around 5G and fiber expansion. The company's debt financing extensions and network expansion in Florida are likely to bolster revenue and profitability by enhancing service offerings and customer engagement, potentially driving future earnings growth. The improved wireless plans by Ultra Mobile could enhance T-Mobile's competitive position, leading to increased customer acquisition and retention, thereby supporting revenue forecasts [1].

However, competitive pressures and potential tariffs remain risks to margins and earnings. Over the past five years, T-Mobile's total return, including both share price appreciation and dividends, was 134.29%, highlighting its robust performance relative to the industry. In the past year, T-Mobile's performance matched the US Wireless Telecom industry, which returned 33.8%, reflecting a strong alignment with industry trends [1].

CIMB Research notes that U Mobile's capital expenditure (capex) is expected to surge from FY25 to FY27 due to the rollout of its second 5G network. The research firm expects funding to not be a concern, as the company will leverage vendor financing and bank loans to support increased capex requirements. Despite a core net loss in FY24, U Mobile's net debt has fallen 3% year-over-year to RM2.7bil, and its capex has remained modest at 5.1% of sales [2].

In the context of analyst price targets, T-Mobile's current share price of US$253.80, with a consensus target of US$269.25, suggests a modest 5.7% upside. This indicates that analysts view T-Mobile as relatively fairly priced based on projected revenue increases and earnings forecasts. While the share price is close to the target, consistent revenue growth and realization of strategic initiatives could justify further price appreciation [1].

Investors should consider these factors against ongoing risks in their assessments. Gain insights into T-Mobile US' historical outcomes by reviewing our past performance report. This article by Simply Wall St is general in nature and does not constitute financial advice.

References:
[1] https://finance.yahoo.com/news/t-mobile-us-nasdaqgs-tmus-172839400.html
[2] CIMB Research Report on U Mobile