T-Mobile US Inc (NASDAQ: TMUS)’s announcement on Wednesday that it will be giving away a free Netflix, Inc. (NASDAQ: NFLX) membership to customers of certain data plans appears to be compelling to customers but isn’t good enough to impress Deutsche Bank’s Matthew Niknam.
Niknam maintains a Hold rating and $70 price target on T-Mobile’s stock as the announced “Netflix On Us” initiative is a continuation of the company’s strategy of giving customers “more bang for the buck.” It will also add another differentiating factor over its competitors on top of other offerings including free international roaming, in-flight Wi-fi and plans that include all taxes and fees.
But the financial implications of the offering can’t be ignored, as the package will be accounted for a contra-revenue and will negatively impact the company’s postpaid phone average revenue per user.
Overall, T-Mobile’s new offering merely adds to the analyst’s ongoing cautious stance on T-Mobile’s postpaid phone ARPU trajectory amid the highly competitive landscape. But the Netflix deal represents another increased risk to the numbers and a base case scenario implies an approximate 1-percent incremental headwind to postpaid ARPU.
Encouragingly, T-Mobile’s new offering won’t impact any of the company’s prior guidance and Wall Street’s expectations.
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|Jul 2017||Credit Suisse||Maintains||Neutral|
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