T-Mo’s CFO on its three areas of focus this year
T-Mobile US reported preliminary numbers on another strong quarter, but the carrier does expect to see higher churn during the course of 2022 as it turns down former Sprint network assets and migrates customer devices.
Peter Osvaldik, EVP and CFO of T-Mobile US, said during last week’s Citi AppsEconomy event that the carrier is focused on three priorities this year: To continue its fast pace of 5G deployment and network integration, integrate Sprint’s customer base and focus on its potential areas of growth in geographic areas and business segments where it has a lower share of the market.
Osvaldik said thatat the close of 2021, T-Mo has 210 million potential customers covered by its “Ultra-Capacity” 5G, which uses the operator’s 2.5 GHz midband spectrum. That figure exceeds T-Mo’s goal of hitting 200 million covered POPs by the end of 2021. It also has hit 310 million covered POPs for its “Extended Range” 5G, which uses 600 MHz.
The second area of focus is “accelerating the integration” of the Sprint customer base, which is generating a higher churn rate for T-Mo. “We always knew this was a base, when we acquired them, from a postpaid phone perspective that was churning over 2%,” Osvaldik explained. “It’s important for us to accelerate as much as possible Sprint integration,” he said, so that the company can get past the heightened churn and and focus on its network as a basis for growth. T-Mo has previously laid out a goal to reduce by half the gap between its so-called “Magenta” customer base and its former Sprint customers.
The third area of focus, Osvaldik added, is for T-Mo to concentrate on its growth opportunities, which it sees in enterprise and government, in smaller, rural markets where it has mid-teen market share, and in high-speed broadband service.
“There is no way that we’re going to lose in the markets where we’re dominant, and yet we have all this differentiated opportunity in the markets where we have low shares,” he added.
In a preview of T-Mo’s fourth quarter numbers, Osvaldik said that T-Mo “absolutely shattered” its goal of reaching 500,000 broadband customers during the fourth quarter of 2021, adding 224,000 customer to end the year at 646,000. “We continue to see great progression and great demand,” he added, saying that T-Mo expects greater growth in this area during ’22 and in 2023 as well. Osvaldik later said that broadband customers are using “hundreds of gigabits” of data per month.
He also said that T-Mo added 315,000 postpaid net accounts, and did its highest Q4 numbers ever in total postpaid net customer additions: 1.8 million. That number includes 844,000 postpaid phone net customer additions, he said.
Asked about the profitability of that customer mix, Osvaldik said that more than half of new retail customers are taking T-Mo’s “Magenta Max” unlimited plan. And despite T-Mo’s history of taking every opportunity to crow about its net-add numbers compared to other carriers, Osvaldik said that the carrier is “not chasing, necessarily, the leadership of [phones]. We’re there to integrate Sprint as quickly as possible to get that tailwind of churn behind us and allowing us to grow even further.”
Network integration work is continuing on pace, he added, with “substantially all” of tower decommissioning work expected to be done by the end of this year, with traffic moved over by mid-2022. And while a “significant amount” of Sprint handsets were compatible with and could use T-Mobile US’ network, many former Sprint customers may not have 600 MHz or 2.5 GHz support in their devices in order to access T-Mobile US’ 5G. In terms of rate plan migration, Osvaldik said that the “vast majority” of that was done in the first half of 2021, but there is more to be done in the first half of this year.
T-Mo is still planning for a March 31 shutdown of the former Sprint CDMA network, and a Sprint LTE turn-down as of June 30 (as well as a shutdown of T-Mo’s old UMTS network as of July 1). “This will be the period … through 2022, of heightened churn,” he acknowledged, adding, “which is completely part of the plan” and that ultimately the benefit of the integrated networks and customer base “is just so worth it to us.”
