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Why T-Mobile US Stock Rose Just 10% in 2017

What happened

Shares of T-Mobile US (NASDAQ: TMUS) gained 10.4% in 2017, according to data from S&P; Global Market Intelligence. Investors in the third-largest wireless provider in North America fell short of larger gains in the stock market overall, as the S&P; 500 returned 19.4% over the same period. A failed attempt to merge with fourth-place network Sprint (NYSE: S) was the core culprit behind this disappointing performance.

Rising stock chart superimposed over digital map of the world
Rising stock chart superimposed over digital map of the world

Image source: Getty Images.

So what

In the first half of 2017, reports of a merger between Sprint and T-Mobile ran rampant. Going beyond mere rumors, management of both companies confirmed that they were having serious talks about a business combination. T-Mobile's stock rose on this wave; Sprint shares stayed as volatile and unpredictable as usual.

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Then the merger idea fell apart. New reports said that Sprint was looking at better buyout offers from the cable industry. Regulatory approval of a T-Mobile-Sprint buyout started to sound like a coin flip. Above all else, clashing larger-than-life personalities on both sides made it impossible to structure a fair deal with a clear post-merger leadership team.

So the two went their separate ways. Both stocks plunged on the news that Sprint and T-Mobile would stay apart, though Sprint investors suffered a much harder hit, experiencing a 30% loss by the end of the year.

TMUS Chart
TMUS Chart

TMUS data by YCharts.

Now what

Throughout all this drama, T-Mobile continued to steal mobile subscribers from its rivals and exceed Wall Street's earnings targets. The company would still prefer to team up with a spectrum-rich partner similar to Sprint in order to build economies of scale, and a merger like that would also help T-Mobile fill gaps in its wireless coverage maps. Moreover, the Un-carrier's consumer-friendly promotions and pricing policies are burning cash while attracting millions of new customers.

Still, the stock roared into 2017 and has now cooled down to a more reasonable valuation. T-Mobile looks like a sensible investment today, but not necessarily a screaming buy.

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Anders Bylund owns one share of T-Mobile US. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.