Calling it a “strong financial performance,” T-Mobile announced their quarterly earnings for 2018. T-Mobile’s momentum from the previous year continued into 2018 with record service revenues of $7.8 billion and their lowest ever postpaid phone churn of 1.07%. “In Q1 2018, we expect to lead the industry with more postpaid phone net additions than Verizon, Comcast, and AT&T combined,” said John Legere, CEO of T-Mobile. “Meanwhile, both of our largest competitors have been unable to grow service revenues year-over-year for 13 straight quarters.”
Colby Synesael, analyst with Cowen agreed with the effervescent CEO, saying the carrier reported upside results, raising guidance for both postpaid net adds and EBITDA. “The net add raise was driven by record low churn, wearables, and the TAM expansion. With a focus (and stock pullback) on the S merger, mgmt. again pleaded its regulatory case and also stressed conservative assumptions,” Synesael said.
A large focus of the call was naturally on the Sprint merger, as management continued its messaged confidence in working with regulators, echoing the comments of a pro-consumer, disruptive, job creating, 5G-dominant carrier. “It’s worth noting,” Synesael said, “that the previously messaged ~25K net tower reduction is only one aspect of tower savings as both companies would also avoid adding ~16K future sites that they would have otherwise needed to build on their own, hence ~50K tower site OpEx avoidance.”
Highlights include:
Financial Performance (all percentages year-over-year):
- Service revenues up 6.5% to $7.8 billion – expect to lead industry for the 16th consecutive quarter
- Total revenues up 8.8% to $10.5 billion – expect to lead industry for the 19th time in the past 20 quarters
- Net income down 4% to $671 million and diluted earnings per share (EPS) of $0.78. Excluding after-tax spectrum gains in Q1 2017 of $23 million and certain net tax benefits related to a valuation allowance release recognized in Q1 2017 of $270 million, net income and EPS increased $266 million and $0.30, respectively.
- Adjusted EBITDA up 10.8% to $3.0 billion – up 12.4% excluding $37.0 million of spectrum gains in Q1 2017
- Net cash provided by operating activities up 27% to $770 million
- Free Cash Flow up 261% to $668 million
Deploying Spectrum and Densifying Network to Improve and Broaden Coverage:
- Aggressive deployment of 600 MHz in Q1 2018, augmenting existing low-band capabilities on 700 MHz
Continued Strong Outlook for 2018:
- Increased target for branded postpaid net customer additions of 2.6 to 3.3 million
- Net income is not available on a forward looking basis
- Increased Adjusted EBITDA target of $11.4 to $11.8 billion including leasing revenues of $0.6 to $0.7 billion
- Unchanged target of cash purchases of property and equipment, excluding capitalized interest, of $4.9 to $5.3 billion. This includes expenditures for 5G deployment
- Three-year compound annual growth rates (CAGRs) for Net cash provided by operating activities and Free Cash Flow from FY 2016 to FY 2019 adjusted to 7% – 12% and unchanged at 46% – 48%, respectively
May 3, 2018
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