T-Mobile reported their second quarter earnings last week, and this is what the analysts had to say:
Jonathan Chaplin of New Street Research: TMUS’s momentum continued amid a competitive 2Q, as the company was able to maintain lower churn and strong gross add share despite Verizon’s price cut in the quarter. We remain wary of the U.S. wireless industry because we expect returns to be competed lower over time; however, we think TMUS is the best one to own. The company trades at a reasonable 7x 2016 EBITDA and is an attractive target for several potential suitors including: DISH, CMCSA [Comcast Corporation], AMX [America Movile], and Sprint (eventually). In the near-term, we expect TMUS to press their relative capacity advantage (they have more spectrum per subscriber than Verizon or AT&T) and be aggressive in offering more data, as they did with their 4-for-$120 with 40GB offering, while the long-term network capacity will likely be solved by one of TMUS’s suitors. Both DISH and Sprint have large swaths of unused spectrum, while CMCSA has a vast un-monetized WiFi footprint that could be used to offload data from the cellular network. Although we don’t know when a formal bid will be made by any of these (or potential other) suitors, we think it is unlikely that the first bid we see will be the last.
Jennifer Fritszche of Wells Fargo: TMUS now covers 290M LTE POPs and still targets 300M by YE2015. The company has 212 markets covered by Wideband LTE and +250 by year end, and 141 markets with 700MHz A block spectrum deployed. 100% of its MetroPCS CDMA spectrum is re-farmed and its customer migration has been completed ahead of schedule. Give credit where due…very solid quarter on the sub side and the EBITDA side. We look for color on thoughts on the upcoming spectrum, commentary on Free Cash Flow and thoughts on competitive market.
Jonathan Schildkraut of Evercore ISI: TMUS released solid 2Q results this morning with the following highlights: (1) despite strong postpaid net adds of 1.01 million (previously released, vs. our 565K estimate), the company delivered higher than anticipated EBITDA of $1.817 billion (+30.9% Q/Q, +25.2% Y/Y), beating ours/cons. by 8.5% and 4.6%, respectively; (2) higher than expected total revs of $8.179 billion (+5.2% Q/Q, +13.8% Y/Y) and service revs of $6.144 billion (+5.6% Q/Q, +12.0% Y/Y), beating our total revs and service revs estimates by 1.2% and 2.1%, respectively; and (3) raising FY15 postpaid net add guidance to 3.4-3.9 million, from 3.0-3.5 million, a 12.3% increase at the mid-point, while maintaining EBITDA guidance. All in, TMUS posted a strong quarter and we remain positive on the company given its customer growth profile and ongoing improvements to the network – no change to our thesis.
Amir Rozwadowski of Barclays: While T-Mobile’s subscriber trends for the quarter performed largely as expected given the company’s recent positive preannouncement, better than expected margins (despite the carrier’s heightened promotional activity) is a notable positive from the company’s results. Branded postpaid ARPU (average revenue per user) recovered strongly from 1Q levels ($48.19 from $46.43 last quarter) given the passing effect of Data Stash (excluding this effect, ARPU would have still increased about 1% on a q/q basis) and the benefit from the easing of the re-pricing of its base. Given its strong market momentum, unsurprisingly, management took up its subscriber expectations for the year and retained its EBITDA expectations. In our view, while we recognize the carrier’s new outlook (raised from 3.0-3.5 million to 3.4-3.9 million) seems to indicate a tempering of subscriber momentum during the remainder of the year, we view the increased guidance for postpaid subscriber net additions as a positive. Ultimately, management’s guidance could prove conservative or a prudent approach to expectations around the competitive environment.
John Hodulik of UBS: T-Mobile’s 2Q revenues grew 13.8% yoy (year on year) to $8.18B (UBSe +10.4%), incl. 12.0% service revenue growth to $6.14 billion (UBSe +10.8%) vs. 9.0% in 1Q. Adj. EBITDA was $1.82 billion (UBSe $1.7 billion), up 25.2% yoy, driving 360 bps of yoy margin improvement to 29.6% (UBSe 28.0%). T-Mobile generated $73M in FCF [free cashe flow] (adjusting for decommissioning of PCS network; UBSe $85 million) on CFO of $1.16 billion (UBSe $1.13 billion) and capex of $1.19 billion (UBSe $1.05 billion), likely due to higher working capital.
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