Over the past 52 weeks, telecom stocks have gone on a big run. T-Mobile (NASDAQ: TMUS), Verizon (NYSE: VZ), and AT&T (NYSE: T) have all mustered total returns at or above the mid-to-high 40% range, surpassing their sector and the S&P 500 significantly.

The Communication Services Select Sector SPDR Fund (NYSEARCA: XLC) is up 40% over that span. Over that period, AT&T is taking the cake, returning nearly 55%. Despite being the biggest names in telecom and often thought of as similar, these firms actually have fairly different models for how they plan to grow and provide value to customers.

I’ll dive into the specifics of T-Mobile and assess how it stacks up against these competitors.

T-Mobile: Prioritizing Flexibility Over Dividends

The financial data shows stark differences among these firms. In particular, T-Mobile stands out from the other two. Verizon and AT&T have decided to put an emphasis on returning value to their shareholders through big dividends.

Over the last twelve months, the dividend yields of the two firms sit above 5%, with Verizon’s nearing the 6% mark. T-Mobile's is just around 1%.

However, forecasts expect T-Mobile to increase competitiveness in this area.

Analysts expect the indicated dividend yield, a forward-looking measure, to be 1.7%, while other two firms' yields will remain mostly stable. Overall, T-Mobile’s lower dividend strategy allows it to have more flexibility on where it spends cash.

T-Mobile’s Valuation Twice as High as Verizon and AT&T

Another big difference is valuation. T-Mobile's forward price-to-earnings ratio (P/E) is 20x, twice as high as Verizon and AT&T's 10x. This means the market will pay twice as much for a dollar of T-Mobile's earnings than for a dollar of the other firms' earnings. There are several reasons for this. First, analysts expect the company to grow faster.

T-Mobile’s three-year compound annual revenue growth rate estimate sits at 4%, surpassing the 1.4% and 1.1% figures pegged for Verizon and AT&T, respectively. When looking at expected earnings per share (EPS) growth, the difference is even wider. The three-year estimated three-year EPS growth rate of T-Mobile sits at 20%, versus just over 1% to slightly negative for the other two.

Another reason for T-Mobile's higher valuation is its much larger gross profit margin. Last quarter, it was 66.2%, over 400 basis points higher than the other two firms. This shows a clear edge in T-Mobile's cost structure.

The company keeps more revenue after accounting for the direct costs of delivering services to customers. This includes maintaining and operating its wireless network and buying devices it sells to customers. However, this margin doesn't include operating expenses such as acquiring customers' marketing and sales costs. After T-Mobile accounts for those expenses, it loses its margin edge. Still, its operating margin slightly beat out the other firm’s last quarter.

However, the higher gross margins are key. They are often harder to raise than operating margins. This is because increasing gross margins could involve charging higher prices, which can push customers away. It could also involve making large investments in the company’s telecom network to increase efficiency. Companies can often more easily reduce operating expenses. For example, cutting back on administrative staff doesn't mean customers need to pay more.

Fixed Broadband Strategies Set T-Mobile, Verizon, and AT&T Apart

These firms also differ in how they invest in the future, especially in fixed broadband. Fixed broadband connects homes and businesses, not mobile devices, to the internet. The two main ways to approach this are physical fiber optic cables connecting directly to these locations or fixed wireless.

Fixed wireless connects homes to a tower like mobile phones. However, its signal is stronger than that of standard wireless towers. This provides higher speeds and reduces the distance the signal can travel.

AT&T has made the hardest push toward fiber connections due to their superior speed and reliability. However, it requires the most investment, as the firm must construct physical connections to buildings. T-Mobile has largely gone through the fixed wireless approach.

This approach is less investment-intensive and allows for an immediate extension of T-Mobile’s wireless network, as the fixed wireless towers can also be used by mobile devices. However, T-Mobile has also recently made investments in fiber. Verizon uses a more balanced approach to investing in both technologies.

Overall, these firms offer different strategies and ways of returning capital to investors, allowing for a range of options when investing in telecom.