Robust customer growth and increased consumer spending bolsters T-Mobile US bottom line, celebrated by investors with new 52-week high
As expected, T-Mobile US posted industry leading third-quarter customer growth and continuing incremental improvements in financial results.
For the quarter, the nation’s No. 3 carrier in terms of customer base said it added nearly 2 million net connections to its network, which was shy of the 2.3 million net connections added last year and is set to lead the market. The carrier ended the quarter with 69.4 million total connections on its network.
Branded postpaid connections accounted for about half of the latest growth, with 851,000 net “phone” connections and 118,000 net “mobile broadband” connections added in the quarter. Those results were just shy, in total, of results from the same quarter last year when the carrier added nearly 1.1 million net postpaid connections for the quarter.
T-Mobile US management cited its recently introduced One plans as the reason for the postpaid surge.
T-Mobile US’ prepaid, which is made up of its branded and MetroPCS business, attracted 684,000 net connections in the latest quarter and out-gained the 595,000 connections added last year. In total, T-Mobile US’ branded efforts attracted 1.65 million net connections in Q3 of this year, nearly matching the 1.68 million net connections posted in 2015.
The main growth shortfall for the carrier came from its wholesale partners, which reported 317,000 net connection additions in the latest quarter compared to 632,000 net connection additions last year. The carrier also reported it sold nearly 1.7 million customers during the quarter – part of its Wal-Mart Family Mobile service – to prepaid-focused brand TracFone Wireless.
T-Mobile US last month gloated it had managed to steal approximately 950,000 customers from its nationwide rivals during Q3. The carrier said it snared nearly 400,000 customers from AT&T Mobility, nearly 300,000 customers from Sprint and more than 250,000 customers from Verizon Wireless through mid-September.
Verizon Wireless last week said it added 525,000 direct net connections during Q3, while AT&T Mobility over the weekend reported 1.5 million total net connection additions to its network during the quarter. Sprint, which is set to announce full results tomorrow, recently released preliminary numbers of 740,000 net connection additions during the quarter.
In addition to stealing customers, T-Mobile US’ customer growth was bolstered by improved customer churn numbers, with postpaid churn dropping from 1.46% last year to 1.32% this year, while prepaid churn dipped from 4.09% to 3.82%.
Customer spending also improved across the table, with postpaid average revenue per user excluding device payments increasing 16 cents to $48.15; branded postpaid ARPU with device payments increasing 42 cents to $63.38; and branded prepaid ARPU increasing 55 cents to $38.01. The carrier did note 318 fewer postpaid customer accounts compared to last year, though each account had an average of .3 more devices connected to each account.
The quality of customers taking the carrier up on its equipment installment plan remained the same sequentially with 42% considered “prime,” which is down from the 52% from last year.
The increased spending and larger customer base attributed to a 17.8% surge in revenue, growing from $7.8 billion in Q3 2015, to $9.2 billion this year. Net income nearly tripled over the same period from $138 million to $366 million; with earnings before interest taxes, depreciation and amortization increasing from $1.9 billion to $2.6 billion and the carrier’s adjusted EBITDA margin growing from 30% to 37%.
Capital expenses were flat year-over-year at more than $1.1 billion for the quarter, with free cash flow increasing from $411 million last year to $581 million in the latest quarter.
Investors were buoyed by the results, with T-Mobile US’ stock (TMUS) trading up more than 7% early Monday and hitting a new 52-week high.
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