T-Mobile continues to dominate the market in terms of overall customer growth despite a year-over-year dip, with investor response muted
T-Mobile US continued to dominate the domestic wireless space in terms of customer growth during the recently completed second quarter, though that overall increase is beginning to wane.
The carrier said it added nearly 1.9 million total net connections during the quarter, which while still industry leading was down both sequentially and year-over-year. By comparison, Verizon Wireless said it added 585,000 direct net connections during the latest quarter, AT&T Mobility posted 1.4 million net connection additions and Sprint counted 377,000 net adds.
T-Mobile US noted its latest growth included 890,000 net postpaid additions, which counted 646,000 “phone” connections and 244,000 mobile broadband connections that include tablets and mobile hot spot devices. Both numbers were down slightly from what the carrier posted in Q2 2015, though the lucrative phone net additions easily outpaced its rivals.
One long-term concern could come from a continuing dip in credit quality of customers signing up for the carrier’s device equipment installment plans, which has dropped from 52% in the “prime” category last year, to just 42% this year.
On the prepaid side, T-Mobile US said it added 476,000 net connections during its latest quarter, which handily outpaced the 178,000 net connections posted last year, but dropped significantly from the 807,000 net prepaid additions posted during the first quarter of this year. The prepaid results were also market leading, with only AT&T Mobility managing to post positive prepaid growth during the quarter.
Wholesale partners added a further 515,000 net connections to T-Mobile US’ network during the quarter, which was down from the 886,000 net connection additions posted last year.
Overall, T-Mobile US said it ended Q2 with 67.4 million total connections on its network, easily staying ahead of smaller rival Sprint (just under 60 million total connections) for the No. 3 spot in the domestic market.
While year-over-year growth failed to match last year’s numbers, T-Mobile US’ retention efforts continue to improve with the operator posting a reduction in postpaid churn from 1.32% to 1.27%, while prepaid churn dropped from 4.93% to 3.91%.
Customer spending was mixed during the latest quarter, with postpaid average billing per user – which includes monthly device payments and service charges – dropping from $63.29 last year to $62.59 this year, while branded prepaid average revenue per user (service only) climbing 3 cents to $37.86.
That relatively flat spending and more than 8 million new connections compared with last year helped boost total revenues from $8.2 billion in Q2 2015, to $9.2 billion this year. Adjusted earnings before interest, taxes, depreciation and amortization surged from $1.8 billion to $2.5 billion year-over-year, with adjusted EBITDA margins growing from 30% to 36% over the same time period.
A slight increase in expenses, including capital expenses that hit more than $1.3 billion in the latest quarter, dropped net income from $361 million during Q2 2015, to $225 million this year. The carrier did note adjusted free cash flow surged from $73 million last year to $485 million this year.
In terms of capex, T-Mobile US said its LTE network covered 311 million potential customers at the end of Q2, nearly matching at least the population coverage footprint of its larger rivals Verizon Wireless and AT&T Mobility, though still short in terms of geographic coverage. The carrier’s use of A-Block 700 MHz spectrum in support of its LTE network surpassed 200 million pops covered in 350 markets.
Moving forward through the rest of the year, T-Mobile US boosted guidance for branded postpaid net additions from between 3.2 million to 3.6 million connections to a new forecast of between 3.4 million and 3.8 million connections; while maintaining capex guidance at between $4.5 billion and $4.8 billion for the year.
Investors seemed uninspired with T-Mobile US’ latest results as the carrier’s stock (TMUS) was trading down slightly early Wednesday, though it did hit a new 52-week high of $45.87 per share yesterday.
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