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T-Mobile Remains Morgan Stanley's Top Telecom Pick Despite Starlink Competition
Summary
Morgan Stanley reiterated its Overweight rating on T-Mobile, citing the carrier's strong market position even as the investment firm projects significant disruption from satellite broadband and lowers its price target.
Morgan Stanley has reaffirmed T-Mobile (TMUS) as its top pick in the telecommunications sector, even while forecasting significant market disruption from Starlink's expansion into broadband services. The firm, however, trimmed its price target on T-Mobile stock to $230 from $260, rolling the valuation forward to mid-year 2027.
The Looming Satellite Threat
According to a note from analyst Sean Diffley, Morgan Stanley projects that Starlink will capture approximately 16 million consumer and small business broadband subscribers in the U.S. by 2030. This anticipated market share gain has prompted the firm to revise its estimates downward for incumbent internet providers.
The analysis highlights a preference for wireless carriers over cable companies amid what it calls structural challenges in the connectivity sector. Morgan Stanley expects cable providers like Comcast and Charter Communications to continue losing 400,000 to 500,000 broadband subscribers annually as satellite competition intensifies.
T-Mobile's Competitive Edge
Despite the competitive pressures, Morgan Stanley believes T-Mobile is best positioned to capture value. The firm outlined several key advantages for the wireless carrier:
Ad- Favorable Pricing: T-Mobile's existing customer base (back-book) is priced roughly 10% or more below its peers, providing a competitive buffer.
- Premium Growth: Strong adoption of higher-tier plans is expected to drive service revenue growth in the mid-to-high single digits through the end of the decade.
- Low Asset Risk: With a relatively small fiber footprint and a capital-light approach using joint ventures, T-Mobile has less exposure to stranded asset risk from satellite competition.
- Strategic Deployments: The company utilizes a capacity-driven strategy for its fixed wireless access (FWA) offerings.
Revised Financial Estimates
Reflecting the potential impact from satellite operators, Morgan Stanley has adjusted its long-term forecasts for T-Mobile. For the 2028-2030 period, the firm reduced its estimates for FWA and fiber net additions by an annual 600,000 and 100,000 subscribers, respectively.
In the near term, for the second quarter of 2026, the firm lowered its prepaid service revenue estimate by approximately $100 million to $2.45 billion. It also reduced its wholesale service revenue forecast by $55 million to $635 million, citing the continued run-off of mobile virtual network operator (MVNO) revenues.