Investing.com -- Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) for T-Mobile U.S., Inc., T-Mobile USA, Inc. (TMUSA), related Sprint subsidiaries and their debt ratings at ’BBB+’ on May 23, 2025. Fitch also assigned a ’BBB+’ rating to TMUSA’s new senior unsecured notes, which will be exchanged for outstanding notes from United States Cellular Corp (NYSE: USM ). (UScellular; BB+/RWN).
Fitch removed T-Mobile’s ratings from Under Criteria Observation (UCO) and stated that the company’s lease-adjusted EBITDAR leverage is now closer to unadjusted leverage. The company’s risk profile was not significantly impacted by the lease criteria update, and the Rating Outlook remains Stable.
T-Mobile’s IDRs reflect its significant scale, leading 5G network position, strong operating momentum, and substantial cash generation. Fitch expects T-Mobile’s near-term cash flows to be strong and that it will maintain a healthy balance sheet while balancing investments and shareholder returns.
Since the April 2020 Sprint acquisition, T-Mobile has improved its scale and earnings, with EBITDA reaching approximately $31 billion in 2024, compared with $12.2 billion in 2019. The company benefits from a growing subscriber base, strong execution in areas such as fixed wireless access (FWA), and capturing share among enterprise and government customers.
T-Mobile’s commitment to maintaining a strong balance sheet and investment-grade ratings benefits the IDR. The company’s EBITDA leverage was 2.6x at March 2025, relatively consistent with the past few years and manageable for the IDR. This is below the high-2.0x debt/EBITDA level it operated at following the 2020 Sprint merger.
T-Mobile’s solid 5G positioning is expected to drive earnings growth over the next several years. Its 5G network covers nearly the entire U.S. population. The company has added more than 495,000 postpaid net phone subscribers since mid-2020 and expanded its FWA offerings to 6.9 million customers as of 1Q25.
The company expects a balanced capital allocation approach within its target leverage. Shareholder returns have significantly increased, with spend expected up to $50 billion from September 2024 through YE27. Inorganic spending is also rising, with plans to spend roughly $11 billion on announced acquisitions and joint ventures in 2025.
The U.S. wireless market remains very competitive, but T-Mobile has been capturing share. Its strong spectrum position and high levels of capex create high barriers to entry for new competitors. The entry of cable companies into wireless services has intensified competition.
Fitch applies Parent-Subsidiary Linkage (PSL) between T-Mobile and its controlling shareholder Deutsche Telekom AG (ETR: DTEGn ) (DT; BBB+/Stable) but believes T-Mobile’s standalone credit profile (SCP) is the same as its parent at ’BBB+’. T-Mobile contributes nearly two-thirds of DT’s consolidated earnings.
Fitch evaluates T-Mobile’s ratings relative to its primary peers in the mobile segment, Verizon Communications Inc (NYSE: VZ ). (A-/Stable) and AT&T Inc (NYSE: T ). (BBB+/Stable), as well as a broader universe of rated peers in the telecom and cable industries. T-Mobile’s wireless business has a similar wireless revenue scale to AT&T, with more postpaid and prepaid phone subscribers, but is smaller than Verizon.
Fitch’s key assumptions for T-Mobile include service revenue growth in the mid-single digits over the forecast period, with stronger growth in 2025 due to acquisitions; EBITDA margins increasing to nearly 40% by 2028, supported by operating leverage from revenue growth and cost savings; and capex could be near 10% of revenue or slightly higher through 2028, with $1.0-2.0 billion per year also assumed for spectrum acquisitions.
Factors that could lead to a negative rating action or downgrade include EBITDA leverage sustained above 3.0x or operating profit declines from greater-than-anticipated competition. Factors that could lead to a positive rating action or upgrade include a consistent capital allocation policy while EBITDA leverage is sustained below 2.25x or improved operational performance exceeding Fitch’s expectations for growth in subscribers, revenue, EBITDA and FCF generation.
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