T-Mobile's Strong Customer Adds Contrast With Rising Capex and Integration Risks

What happened

T-Mobile US added 2.4 million net customers in the recent quarter, sustaining double-digit year-over-year growth and nearing 140 million total connections, as a Seeking Alpha article highlights its regained investment appeal. However, the DeepValue master report reveals the stock has fallen about 25% from 2025 highs, driven by investor skepticism over elevated capital expenditures and the complexity of integrating acquisitions like UScellular. While customer growth appears robust, filings show it is increasingly acquisition-driven rather than organic, obscuring underlying momentum and raising execution risks. The company's adjusted free cash flow remains strong at around $18 billion annually, but net debt of $109 billion and rising capex threaten future capital returns and margin expansion. Thus, despite optimistic headlines, T-Mobile's investment case depends on flawless execution of synergy targets and maintaining postpaid net adds above 6 million annually, which is far from certain in a competitive market.

Implication

The recent net adds, while impressive, are increasingly fueled by acquisitions, introducing dilution and integration risks that could hamper organic growth and synergy realization. Elevated capex for 5G-Advanced and fiber build-outs may compress free cash flow if subscriber growth slows, jeopardizing the $14 billion annual capital return program. High leverage at 3.5x net debt to EBITDA limits financial flexibility, making T-Mobile vulnerable to competitive pricing pressures or economic downturns. The CEO transition to Srini Gopalan adds operational uncertainty, with any missteps in strategy or integration potentially derailing the $1.2 billion UScellular synergy target. Therefore, investors must closely monitor postpaid net adds, capex trends, and integration milestones, viewing current valuations as contingent on sustained execution rather than a guaranteed rebound.

Thesis delta

The Seeking Alpha article's focus on customer growth aligns with T-Mobile's historical strengths but does not address the elevated capex and debt concerns highlighted in the DeepValue report. Thus, the investment thesis remains unchanged: TMUS is a potential buy at $185-$190 only if it sustains >6 million annual postpaid adds and delivers on synergy targets, but risks are heightened by acquisition complexity and capital intensity.