T-Mobile US (NASDAQ:TMUS) recently began celebrating its four-year anniversary as a public company. Longtime shareholders also have reason to cheer. Since the 2013 reverse merger that brought together T-Mobile USA -- at the time a wholly owned subsidiary of Germany's Deutsche Telekom AG -- with MetroPCS Communications, the combined company's stock has more than quadrupled in value.
Yet in many ways, T-Mobile's future appears even brighter than its past. Here's why.
1. Industry-leading customer growth
T-Mobile added 1.1 million customers in Q1 2017, marking its 16th consecutive quarter of more than 1 million net customer additions. Those customers include 914,000 total postpaid net additions, which T-Mobile expects will lead the industry for the fifth consecutive quarter. Moreover, the 798,000 postpaid phone customers T-Mobile added during the quarter is likely to represent more than 250% of the industry's growth.
This comes even as larger competitors Verizon Communications (NYSE:VZ) and AT&T (NYSE:T) recently began offering unlimited data plans in order to stem customer defections to T-Mobile. Yet these moves have not stopped Verizon and AT&T from continuing to lose wireless subscribers to T-Mobile. In fact, seemingly unfazed by the actions of its competitors, T-Mobile raised its 2017 customer growth forecast to a range of 2.8 million to 3.5 million branded postpaid net additions, up from prior estimates of 2.4 million to 3.4 million.
2. Strong customer loyalty
In addition to wresting customers away from its competitors, T-Mobile is also doing a solid job of keeping its own customers happy. Its customer churn rate -- the percentage of subscribers canceling every month -- declined 10 basis points sequentially and 15 basis points year over year to a record low 1.18% in the first quarter.
As a further testament to its strong standing with its customers, T-Mobile closed out 2016 ranked No. 1 in customer service satisfaction ahead of Verizon, AT&T, and Sprint (NYSE:S), according to a survey by Nielsen Mobile Insights. T-Mobile also ranked highest for net promoter score, likelihood to recommend, and overall customer satisfaction.
3. Industry-leading financial growth
T-Mobile's impressive new subscriber wins and customer retention are helping to drive revenue sharply higher. Total revenue checked in at $9.6 billion in Q1 2017, representing year over year growth of 11% -- a rate T-Mobile expects will lead the industry for the 15th quarter in the past four years.
Importantly, T-Mobile cash generation also continues to improve. In 2016, operating cash flow increased 13% to $6.1 billion, and free cash flow more than doubled to $1.4 billion. Even better, management expects T-Mobile to grow its operating and free cash flow at annualized rates over the next three years of 15%-18% and 45%-48%, respectively.
4. A new network quality leader?
T-Mobile's growth has largely been fueled by its edgy "Un-carrier" promotional campaigns and aggressive pricing. Soon, it may have another powerful tool in its arsenal to wield against its competitors.
In early April, T-Mobile scooped up $8 billion worth of low-band 600 MHz spectrum in a Federal Communications Commission auction. The aggressive move represented 45% of all the spectrum sold and quadrupled T-Mobile's low-band holdings. That's important, because low-band spectrum is particularly useful in rural markets and inside buildings -- two areas where T-Mobile has historically lagged Verizon.
CEO John Legere plans to use this spectrum to compete even more aggressively with AT&T and Verizon in terms of network quality. "We secured a nationwide footprint that will enable us to bring low-band spectrum to consumers across every single inch of the country," Legere said during a conference call with analysts. "This is a game changer for T-Mobile and sets the stage for us to continue our momentum moving forward."
Legere went on to note that its auction wins boosted T-Mobile's total nationwide spectrum by 39%. "T-Mobile now has more spectrum per customer than the duopoly and over 50% more than Verizon," Legere said. "This means more uncongested, wide-open wireless freeway lanes for T-Mobile customers."
If Legere is correct and T-Mobile's new spectrum helps to place its network quality ahead of Verizon's in many parts of the country, T-Mobile may have a powerful new competitive advantage to lure even more customers away from its rivals.
5. Takeover target
T-Mobile's shareholders could enjoy gains even sooner if the company is acquired. Legere said that the company is open to discuss a potential deal once the FCC lifts its ban on April 27, which barred companies participating in the spectrum auctions from conducting merger talks.
"The inorganic and organic possibilities for the company are tremendous," Legere said. "We are interested in looking at some of the possibilities."
Sprint's controlling shareholder, SoftBank (OTC:SFTBF), has long been rumored to be a potential suitor. T-Mobile is also believed to be interested in exploring a deal with a major cable company. And rumors of T-Mobile potentially merging with satellite leader Dish Network (NASDAQ:DISH) have recently intensified.
"We will look at the opportunities to even further accelerate that growth or create much more shareholder value, so coming at this exactly the way I dreamt we would at this period, from a position of strength and willing to talk, but not needing to, which is really a difference," Legere said during a CNBC interview.
The best is yet to come
Whether or not a deal occurs, T-Mobile is poised for continued success. As Legere noted, the company is operating from a strong competitive position: It's pacing the industry in terms of customer, revenue, and cash flow growth. And it's doing so during a time when growth is coveted in a wireless market that's become mostly saturated.
That puts T-Mobile in the driver's seat. It can choose to do a deal or remain independent. Either way, T-Mobile investors are likely to enjoy handsome rewards in the years ahead.