Please ensure Javascript is enabled for purposes of website accessibility

Better Buy: AT&T vs. T-Mobile

By David Jagielski - Oct 15, 2019 at 9:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The two companies are both solid investments over the long term, but which telecom stock has the edge today?

Next year could be a pivotal one for telecom stocks with the race for 5G heating up and consumers having even more content options. Two telecom stocks that are right in the thick of that battle are AT&T (T -0.68%) and T-Mobile US (TMUS -0.32%). While both companies have seen their shares perform well this year, rising more than 25% since January, that may not be the case in 2020.

Let's take a closer look at these two stocks to see which one of them is a better buy heading into next year.

Battle for content is heating up

With Time Warner now firmly in its arsenal, AT&T is looking to capitalize on this significant opportunity by launching HBO Max. The service, which will cost up to $17 a month for premium content, could help the company attract cord-cutters. A content-rich HBO package could be an intriguing option right now, as Netflix loses content and subscribers decide which service(s) they want to keep.

User making a selection on a remote aimed at a TV


T-Mobile is also making a move, albeit a slightly different and more expensive one with the launch of its TVision package that will come in at $100/month. While it may be competitive in comparison with other cable packages, it may not be a popular option for those looking to cut their costs.

5G could be another big battleground

Having the fastest network is something every big telecom provider strives for, and that's why the race to 5G could have big implications for which of these two companies will dominate next year.

The rollout already started for AT&T in late 2018 and as of this April, there were 19 cities with access to the company's 5G network. It won't be until next year, however, that AT&T says the network will be more widely available across the country.

For T-Mobile, the picture is a bit less clear since there's a big question mark over its merger with Sprint which, after a year and a half, is still awaiting the necessary approvals. The two companies are working on a concerted effort to build out their 5G networks but if the deal falls through, it could set back the progress made by what's often dubbed the "New T-Mobile." But if all goes according to plan, the new company expects to have a "broad and deep nationwide 5G network to market quickly in the first years of the 5G innovation cycle." T-Mobile could also offer more competitive pricing on 5G than its peers.

Winner: AT&T

Both AT&T and T-Mobile will be key players when it comes to 5G, but the uncertainty surrounding the Sprint and T-Mobile merger gives AT&T a slight edge. And with AT&T looking to generate some significant growth from the launch of HBO Max, it could be shaping up to be a great year. Another advantage for AT&T investors is that the stock pays a dividend of 5.5%, which could further strengthen the stock's returns.

Even from a value perspective, AT&T's price-to-earnings multiple of 16 falls well below the 21 times earnings that T-Mobile currently trades at. With less risk, some great opportunities to grow and an impressive dividend, AT&T is the clear winner today.

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
$18.30 (-0.68%) $0.12
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
$145.08 (-0.32%) $0.47
Netflix, Inc. Stock Quote
Netflix, Inc.
$239.62 (-0.64%) $-1.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.