T-Mobile Issues €2.5 Billion Euro Notes, Adding to High Leverage Amid Competitive Strain

What happened

T-Mobile has agreed to sell €2.5 billion in euro-denominated senior notes with maturities from 2032 to 2038 and interest rates ranging from 3.200% to 3.900%. This debt issuance occurs against a backdrop of rising postpaid phone churn and intense promotional competition, as detailed in recent filings that show churn increased to 0.93% in 2025. The DeepValue report highlights T-Mobile's already elevated net debt of $111.6 billion and a net debt to EBITDA ratio of 6.4, indicating significant financial leverage. With a remaining share buyback authorization of up to $14.6 billion through December 2026 under its ~$80 billion capital return and investment plan, the company may be using this issuance to support shareholder returns. However, adding euro-denominated debt raises questions about liquidity needs and financial flexibility in a market where operational margins are under pressure from device-heavy promotions and UScellular integration costs.

Implication

Investors should recognize that the €2.5 billion debt adds to T-Mobile's substantial net debt of $111.6 billion, potentially straining interest coverage and limiting future capital allocation flexibility. With a net debt to EBITDA ratio of 6.4, any failure to meet EBITDA targets—due to rising churn or integration overruns—could worsen leverage and threaten the ~$80 billion capital return plan. The euro denomination might aim to diversify funding or secure favorable rates, but it introduces currency risk and suggests possible cash needs beyond U.S. operations, despite the company's U.S.-centric focus. While the proceeds could support ongoing buybacks and dividends, this move emphasizes the precarious balance between shareholder returns and debt management in a promotion-heavy market. Ultimately, investors must scrutinize how these funds are deployed, as misallocation could signal deeper financial stress and erode the margin of safety already limited by high valuation multiples.

Thesis delta

The debt issuance does not shift the core investment thesis, which remains dependent on stabilizing churn and achieving ARPA growth targets. However, it introduces incremental financial risk by increasing leverage, potentially pressuring T-Mobile's ability to deliver on its EBITDA and FCF guidance if operational performance falters. Investors should closely monitor the use of proceeds and any signs of deteriorating credit metrics, as these could amplify downside risks in an already competitive environment.