Telecom titans AT&T (NYSE:T) and T-Mobile US (NASDAQ:TMUS) are rushing to deliver 5G wireless networks to customers. The technology delivers faster internet speeds and can support more connected devices, opening the door to increased equipment sales as customers upgrade to 5G-enabled devices.

Gartner forecasts 5G-enabled mobile phone shipments will grow from 11% of total phone shipments this year to over 40% in 2022. Does one company have an advantage over the other when it comes to 5G? Are other factors at play to make one a better buy? A deep dive into each can deliver answers.

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AT&T's strategy

AT&T expects to reach nationwide 5G wireless service later this summer. The company anticipates 5G to drive revenue growth through customer device upgrades, and the adoption of bundles combining 5G access with other AT&T products.

Customer equipment upgrades spurred on by greater 5G availability can help the company restore some of the equipment sales it lost in the first quarter of 2020. The COVID-19 pandemic forced the closure of retail stores, and equipment sales were down 8% year over year, falling from last year's $3.7 billion to 2020's $3.4 billion.

Even so, AT&T's telecom business is proving durable during the pandemic. First-quarter wireless service revenue rose 2.5% year over year to $14 billion from $13.6 billion. This marked four quarters of sequential growth in wireless service revenue. The company also generated free cash flow of $3.9 billion despite the pandemic's economic impact.

AT&T achieved its sales growth through an increase in the average revenue per user (ARPU) among its postpaid subscriber segment. The telecom industry values postpaid subscribers over prepaid because the former exhibit higher ARPU and a lower churn rate. AT&T's postpaid ARPU increased from $49.67 in 2019 to $50.63 this year as more postpaid subscribers shifted to the company's pricier unlimited data plan.

AT&T's 5G investments complement its latest streaming service, HBO Max, which it launched earlier this year. The faster 5G network delivers an improved customer experience for streaming services, which rose in popularity as pandemic-induced lockdowns forced consumers to adopt digital entertainment. AT&T currently offers a 5G bundle with HBO Max in its most expensive subscription tier.

T-Mobile's strengths

Rival T-Mobile completed a merger with Sprint on April 1. The addition of Sprint's valuable wireless spectrum assets gives T-Mobile frequencies in three spectrum segments that are key to delivering a strong 5G network across dense urban areas and rural locations.

T-Mobile was doing well even before the merger. It enjoyed a stellar first quarter despite the pandemic, which forced 80% of T-Mobile stores to close.

Total revenue was flat year over year due to reduced equipment sales from store closures. But it enjoyed a record 5% increase in wireless service income to $8.7 billion. This translated into record net income of $951 million, up 5% year over year, and record free cash flow of $732 million, an 18% increase.

T-Mobile had 777,000 postpaid net customer additions in the first quarter, the highest in the industry and the ninth consecutive quarter T-Mobile led in this metric. Given the value of postpaid customers, these results reveal T-Mobile's strength in snatching customers away from its rivals.

Equipment revenue made up 22% of T-Mobile's total 2019 sales. This percentage dropped to 19% in the first quarter as equipment sales declined 16%, dropping $399 million year over year. As customers transition to 5G-enabled devices, T-Mobile has an opportunity to regain this lost equipment revenue.

The final verdict

AT&T possesses compelling attributes that make it a buy, but it has downsides, too. It took on a lot of debt to acquire Time Warner, which is weighing on the company, particularly during the economic downturn created by the pandemic. AT&T must continue paying its debt commitments while funding a high-yield dividend and growing out its 5G network.

T-Mobile's record financial results amid a pandemic and the potential technological advantage of its 5G network make it a compelling alternative to its rivals. The company's marketing under the "Un-Carrier" moniker helps it consistently grow its customer base as well. These attributes, even without a dividend, make T-Mobile the winner of this telecom matchup.