In one corner stands AT&T (NYSE:T), the $210 billion telecommunications behemoth. In the other stands hard-charging challenger T-Mobile (NASDAQ:TMUS).

With AT&T, we have an industry stalwart with 34 straight years of dividend increases. With T-Mobile, we have a rising star with 15 consecutive quarters of industry-leading revenue growth.

It's an intriguing matchup. Read on to see who will be crowned champ of this telecom showdown.

Two business people wearing boxing gloves

We pit AT&T versus T-Mobile in this better buy battle. Image source: Getty Images.

Competitive position 

Though it's primarily known for its wireless phone services, AT&T is also the largest pay TV provider in the United States. This gives it the ability to bundle its services. Thanks to its $49 billion acquisition of DIRECTV in 2015, AT&T can offer its customers a service package that includes wireless, home phone, internet, and satellite TV. And with its new DIRECTV Now offering, AT&T has also added a streaming video option to the mix.

T-Mobile, on the other hand, focuses almost exclusively on its wireless offering. Its competitive strategy is centered on its "Un-carrier" initiatives, which entail moves such as including taxes and fees in its pricing, excluding video streaming from data caps, and even throwing in a free Netflix subscription with its family plans.

Moreover, T-Mobile is investing heavily to strengthen its wireless network. Its efforts are already bearing fruit: Recent studies suggest that T-Mobile's wireless network quality may now be best-in-class. This, combined with the popularity of its Un-carrier promotions, is helping T-Mobile gain subscribers at rapid clip, often at the expense of AT&T. With T-Mobile steadily gaining share from its larger rival, I'd argue that it's now in the stronger competitive position.

Winner: T-Mobile 

Financial fortitude

Let's now take a look at how AT&T and T-Mobile compare in regards to financial strength.

Metric

AT&T

T-Mobile

Revenue

$160.55 billion

$40.6 billion

Earnings before interest, taxes, depreciation, and amortization

$45.44 billion

$10.69 billion

Operating income

$20.95 billion

$4.89 billion

Operating cash flow

$39.15 billion

$7.96 billion

Free cash flow

$17.6 billion

($3.1 billion)

Cash

$50.5 billion

$1.22 billion

Debt

$165.67 billion

$30.91 billion

Data sources: Morningstar and Yahoo! Finance.

AT&T's operating profits and cash flow dwarf those of T-Mobile. It also generated more than $17 billion in free cash flow over the past year, while T-Mobile's capital spending continues to outpace its cash production. And while most of it is earmarked for its pending acquisition of Time Warner, AT&T currently has more than $50 billion in cash in its coffers, compared to only about $1.2 billion for T-Mobile. Thus, AT&T currently has a clear edge in terms of financial fortitude.

Winner: AT&T

Valuation

No "better buy" discussion should take place without a look at valuation. So let's check out some key metrics for these telecom rivals.

Metric

AT&T

T-Mobile

Trailing P/E

7.31

11.84

Forward P/E

10.09

14.84

PEG

1.12

0.66

Data source: Yahoo! Finance.

AT&T appears to be the better bargain until you look at the price-to-earnings-to-growth (PEG) ratio, which in my opinion is the most important out of these three metrics. The sizable variance in AT&T's and T-Mobile's PEG ratios is due to the fact that Wall Street is expecting T-Mobile to grow its earnings at an annualized rate of more than 28% over the next five years, compared to about 9%  annually for AT&T. That's why, even though it has a significantly higher P/E ratio, T-Mobile's stock is 40% less expensive on a PEG basis. As such, I'd argue that it's the better bargain.

Winner: T-Mobile

The winner is...

In a surprise upset, underdog T-Mobile takes down AT&T. AT&T is still a financial powerhouse, but T-Mobile's superior growth trajectory and more attractively valued stock make it the better buy today.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends Time Warner and T-Mobile US. The Motley Fool has a disclosure policy.