T-Mobile US Q3 results paced larger rivals in some metrics, finances fail to impress
T-Mobile US continues to be a significant attraction for mobile customers, though in the third quarter its dominance in growing its subscriber base cooled off a bit.
The carrier said it added more than 2.3 million net connections during the quarter, which was down slightly from the same quarter last year, but ahead of previous forecasts of 2.1 million net additions. The latest results did push the carrier past another significant customer milestone, ending the period with 61.2 million total connections on its network.
T-Mobile US’ growth came up short of the more than 2.5 million net connections added by AT&T Mobility during the quarter, which was bolstered by “connected devices,” but was nearly double the 1.2 million direct connections reported by Verizon Wireless, which only reports direct net additions.
T-Mobile US’ latest growth was paced by lucrative postpaid “phone” customers, which accounted for 843,000 net additions for the quarter. That result was down from the nearly 1.2 million net customers added last year, though still ahead of the 694,000 segment customers added by Verizon Wireless and actual segment loss posted by AT&T Mobility.
T-Mobile US also tacked on an additional 242,000 “mobile broadband” postpaid connections, which include mobile hot spots and tablet devices, pushing its total postpaid haul to just under 1.1 million net additions. That result did fall short of the 1.2 million postpaid net connections reported by Verizon Wireless and was down year-over-year.
The carrier nearly made up the deficit through its prepaid and wholesale segments, both of which posted year-over-year increases. Branded prepaid services attracted 595,000 net customers for the quarter, surpassing both Verizon Wireless and AT&T Mobility, while resellers added 632,000 net additions in Q3.
Helping to boost customer growth were year-over-year improvements in customer churn, with postpaid churn dipping from 1.64% to 1.46%, while prepaid churn dropped from 4.78% to 4.09%. The lower churn results would indicate T-Mobile US attracted fewer gross postpaid connections during its latest quarter, though its prepaid business looked to have been flat in gross customer growth.
T-Mobile US customers continue to spend more money per month with the carrier, with average billing per account increasing $15.83 compared with the previous year to $154.56 per account. That increase was bolstered by the number of lines per account growing from 2.29 last year to 2.48 this year.
In more traditional terms, average service revenue per user continued to decline as the carrier shifts revenues to device payments, with postpaid ARPU dropping $1.85 year-over-year to $47.99, while prepaid ARPU was down 13 cents to $37.46.
Financially, the larger customer base helped T-Mobile US post a 6.8% increase in total revenues to more than $7.8 billion for the quarter. However, the latest results were down sequentially from the nearly $8.2 billion posted in Q2.
Adjusted earnings before interest, taxes, depreciation and amortization surged from $1.3 billion last year to $1.9 billion this year, with adjusted EBITDA margins growing from 24% to 30%. T-Mobile US also managed to post positive net income for the quarter, turning around from a loss of $94 million last year to a return of $138 million this year.
In a regulatory filing, T-Mobile US said it does not expect the recent breach of customer data through vendor Experian to have a “material impact” on its finances.
Capital expenses also remained nearly flat year-over-year at $1.1 billion for the quarter, though is up slightly for the full year at nearly $3.3 billion. The carrier added it expects full-year capex to be between $4.4 billion and $4.7 billion. T-Mobile US said it recently hit its previous year-end guidance of 300 million potential customers covered by its LTE network, including 175 million LTE pops covered by its 700 MHz spectrum.
The financial community was expecting a bit more out of T-Mobile US for the quarter, and despite CEO John Legere ringing the bell to open the market, the company’s stock (TMUS) was trading down in premarket activity Tuesday.
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