T-Mobile US (TMUS -0.43%) reported stellar second-quarter earnings results last week, which stood in contrast to reports from its biggest rivals in the wireless industry. AT&T warned investors of its diminishing cash flow outlook, while Verizon Communications reported disappointing net additions and earnings.

One culprit for T-Mobile's competition is their push toward more device promotions, sometimes giving subscribers (both new and existing) free phones in exchange for their loyalty. T-Mobile says it can be much more disciplined with its approach.

A flight to value

Amid these uncertain economic times, consumers are looking to save money and maximize the value they get from what they buy. "There is a flight to value that I believe is beginning to happen," T-Mobile CEO Mike Sievert told analysts during the company's second-quarter earnings call. He believes T-Mobile is able to provide better value than its competitors.

While AT&T and Verizon were raising prices, T-Mobile kept its prices steady. Those are prices that have historically been lower than the competition. T-Mobile currently offers better pricing on many of its plans versus comparable plans at AT&T and Verizon, especially for family plans.

With lower-priced plans, T-Mobile has become much less aggressive in its device promotions compared to AT&T and Verizon. For example, the release of the new Google Pixel 6a has Verizon offering the phone for free with certain 5G plans. AT&T is offering about $400 in bill credits with an eligible plan. T-Mobile, meanwhile, is simply using a standard trade-in promotion with up to $300 in bill credits for a relatively new device in good condition.

The less aggressive device promotions from T-Mobile speak to the carrier's competitive advantages. T-Mobile's biggest differentiator these days is "this value proposition that gives customers the best value without having to make any trade-offs on network," Chief Marketing Officer Mike Katz said on the earnings call. Indeed, T-Mobile's 5G network has consistently ranked first in third-party tests.

T-Mobile is vying to win customers who are switching from AT&T and Verizon, which they did at higher rates last quarter than the year before. And it's not using device promotions to do it.

The impact on the financials

Since T-Mobile isn't spending heavily to subsidize new devices up front, it doesn't have to outlay as much cash in its subscriber acquisitions. And while it's investing heavily in decommissioning the legacy Sprint network and building its 5G coverage, its free cash flow generation is still improving.

Management increased its free cash flow guidance to between $7.3 billion and $7.6 billion, a $50 million raise at the midpoint from previous guidance. That's a 33% increase from 2021.

By comparison, AT&T now expects to generate free cash flow of $14 billion for the full year. But that's way down from the $23 billion free cash flow outlook the company provided at the start of the year. And considering the importance of the dividend to AT&T shareholders, the cash flow struggles weigh heavily on the stock.

Verizon, likewise, has seen a crunch in free cash flow. The metric is down nearly 40% through the first half of the year. That said, it's leading the industry with over $7 billion in free cash flow generation so far. But, as with AT&T, many investors are holding the stock for its dividend.

T-Mobile is proving the only wireless carrier producing growth in free cash flow. That should enable it to reinvest in the business to maintain and grow its 5G network advantage while returning some capital to shareholders through its buyback program. The trend puts T-Mobile stock on very solid footing.