T-Mobile Beats Estimates as Customer Growth Outpaces Verizonby
Unlimited data, Binge On attracts 969,000 new monthly users
Carrier driving profits despite price cuts, giveaway promos
T-Mobile US Inc. posted profit that exceeded analysts’ estimates, a sign that the third-largest U.S. carrier is managing to lure new customers with lower prices without punishing the bottom line.
Adjusted earnings before interest, tax, depreciation and amortization rose to $2.6 billion, the Bellevue, Washington-based company said Monday in a statement. Analysts predicted $2.4 billion, the average of estimates compiled by Bloomberg. The company added 969,000 total monthly subscribers, beating the 829,000 average of eight analysts surveyed by Bloomberg.
The results show that T-Mobile’s maverick chief executive officer, John Legere, is finding a way to balance user growth with the costs required to keep customers coming. Shares rose as much as 8.9 percent to $50.93 in New York Monday, their biggest intraday gain in more than two years. The stock was trading at $50.82 at 2:25 p.m. Through Friday’s close, T-Mobile had gained 20 percent this year.
Some of T-Mobile’s customer wins in the quarter came at the expense of Verizon Communications Inc. and AT&T Inc., the No. 1 and No. 2 U.S. wireless carriers. Verizon suffered its worst quarter of subscriber growth in more than six years, while AT&T reported an eighth straight quarter of net postpaid phone losses amid the increased price competition from T-Mobile and Sprint. AT&T had been scheduled to report results on Tuesday but instead released them less than an hour after announcing its acquisition of Time Warner Inc. over the weekend.
“Yikes @ATT! Terrible Q3 results! Could explain the focus on buying another company. Any other diversion tactics!?” Legere tweeted Saturday night. Days earlier, he mocked Verizon in a series of emoji tweets that he said best represented the carrier’s weak results.
To take on its bigger rivals, T-Mobile is pitching free video-streaming promotions like Binge On and unlimited data plans to families and video junkies hooked on YouTube and Snapchat. With strong demand for Apple Inc.’s iPhone 7, T-Mobile has introduced a $160-a-month unlimited data plan for a family of four, a lucrative consumer group.
Legere, on Bloomberg TV, predicted T-Mobile would be bigger than AT&T in just a few years.
“It has been way over two years since they’ve added a customer,” Legere said earlier on a conference call. “They’re just not interested in this business or in participating. And that’s why they’re vertically integrating their business into other businesses.”
Chief Operating Officer Mike Sievert, in an interview Monday, backed up Legere’s claim.
“If you do the math on the rate and pace we are on, we will be bigger than AT&T in wireless phone customers in five years,” Sievert said, without explaining his calculation.
AT&T doesn’t disclose the total number of monthly phone subscribers, but as of the end of September the carrier had 77.4 million so-called postpaid wireless customers, which includes tablet users. T-Mobile has 33.2 million and has been adding about 1 million subscribers a quarter. Based on that pace and if AT&T maintains its current customer base, it might take closer to 11 years.
AT&T’s recent moves, including the Time Warner deal, means “another year or two of really thankful donations from AT&T” to T-Mobile’s further growth, Legere said.
- Sales rose 18 percent to $9.2 billion from a year earlier. Analysts predicted $9.43 billion.
- Monthly phone subscriber additions were 851,000, compared with the 818,000 average estimate.
- Third-quarter net income rose to $366 million, or 42 cents a share, from $138 million, or 15 cents, a year earlier.
- T-Mobile’s branded average revenue per postpaid phone user was $48.15, exceeding the $46.61 estimate average of eight analysts surveyed by Bloomberg.
- T-Mobile said it now expects 3.7 million and 3.9 million new lucrative monthly subscribers this year, up from a previous range of 3.4 million to 3.8 million.
- For the full year, the carrier also expects adjusted Ebitda to be in the range of $10.2 billion to $10.4 billion, up from $9.8 billion to $10.1 billion.