Investors warm to T-Mobile US’ positive financials with stock price up in early trading
T-Mobile US’ strong customer growth has not come without a bit of financial strain, although the carrier’s most recent quarter showed it was posting numbers ahead of some expectations.
T-Mobile US reported $8.2 billion in total revenue for the second quarter, which was nearly $1 billion more than it posted for the same period last year. That growth was due to 8.5 million more connections on its network as well as increased revenue per connection. T-Mobile US reported average branded postpaid billing per user, which includes equipment installment plan revenue, increased $3.50 year-over-year, while average branded prepaid revenue per user increased by 67 cents.
While revenue was up, spending also increased, with T-Mobile US reporting nearly $7.6 billion in total operating expense for its latest quarter compared with $6.2 billion the previous year. Some of that increase was tied to increased capital expenses, which grew from $940 million last year to $1.19 billion this year. That increased capex spending helped T-Mobile US boost LTE coverage to 290 million potential customers at midyear, with plans to still hit 300 million pops covered by year end.
T-Mobile US also reported it had deployed 700 MHz spectrum support in 141 markets and reiterated its complete migration of MetroPCS customers to its native network and resulting refarming of spectrum assets previously used to support MetroPCS’ legacy CDMA network.
The financial give-and-take resulted in a slight dip in net income, which dropped from $391 million last year, or a return of 48 cents per share, to $361 million this year, or a return of 42 cents per share. T-Mobile US did note that the year-over-year decline was primarily due to $747 million in gains posted last year on “disposal of spectrum licenses.” Adjusted earnings before interest, taxes, depreciation and amortization also improved from $1.45 billion last year to more than $1.8 billion in its latest quarter.
Despite the downward move on income, T-Mobile US’ results actually came in significantly ahead of analyst forecasts, which had the carrier expected to post just under $8 billion in revenue, $1.74 billion in adjusted EBITDA and a return of 19 cents per share. Investors took the results to heart, sending T-Mobile US’ stock (TMUS) up more than 2% in early Thursday trading.
T-Mobile US previously reported robust Q2 customer growth, which included 2.1 million net connection additions to its network, pushing its total base to 58.9 million connections and perhaps officially taking over the No. 3 position in the domestic wireless market.
Branded postpaid net additions topped the growth, with T-Mobile US stating it added just over 1 million connections to its network tied to a device financing plan. The postpaid growth was dominated by “phone” connections, which accounted for 760,000 net additions, with mobile broadband devices – which includes tablets and mobile hot spots – accounting for 248,000 net additions. Total branded postpaid growth increased 11% year-over-year.
Branded prepaid net additions surged 75% year-over-year, with T-Mobile US posting 178,000 net additions during the last quarter. The carrier also noted 175,000 branded prepaid connections migrated to postpaid options, which was down sequentially.
Branded postpaid and prepaid churn was mixed bag for the carrier. While postpaid churn dropped year-over-year from 1.48% to 1.32%, it ticked up from 1.3% sequentially. On the prepaid side, churn increased from 4.5% last year to 4.93%, which was also an increase from 4.62% during the first quarter of this year.
T-Mobile US’ management noted a slight slowing in porting trends from its rivals through the first month of the third quarter compared with Q2, dropping from 1.5-to-1 to 1.2-to-1 with Verizon Wireless, from 1.9-to-1 to 1.8-to-1 with AT&T Mobility and from 2.5-to-1 to 2-to-1 with Sprint.
Looking ahead, T-Mobile US increased full-year customer growth guidance from between 3 million and 3.5 million net additions to between 3.4 million and 3.9 million. Full-year adjusted EBITDA guidance remained at between $6.8 billion and $7.2 billion, as did full-year capex at between $4.4 billion and $4.7 billion.
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