01
May
tmo

Bucking the status quo of American wireless companies seems to be working for Legere and Company. For the first three months of 2014 T-Mobile added 2.4 million new wireless customers, according to the company's financial report published this morning. In the crucial post-paid segment (as opposed to the less reliable prepaid segment) T-Mobile added 1.3 million new subscribers.

While T-Mobile is still a long way away from 800-pound gorillas AT&T and Verizon Wireless, it's safe to say that the lower prices and ceaseless "Uncarrier" promotions are having an effect. For example, Verizon added only 549,000 new wireless customers in the same timeframe, while AT&T added just over one million - T-Mo beat them both in terms of new post-paid customers. At least some of that comes from the company's recent acquisition of MetroPCS, since this was the first quarter where financials for both companies were combined. T-Mobile's total revenue this quarter was $6.875 billion, up just under 1% from Q4 2013 and up more than 15% from the same time last year.

T-Mo now serves an estimated 49.1 million customers - not bad for a company that was on the verge of being absorbed by AT&T just two years ago. Compared to 68 million and 97 million post-paid subscribers at AT&T Wireless and Verizon Wireless, respectively, and 54 million total over at Sprint, T-Mobile is still a close fourth in the US. But it's clear that at least some of the big boys' subscriber base is moving, despite the copycat plans and promotions like AT&T Next and Verizon Edge.

Rumors in the financial sector continue to point towards a potential merger between Sprint and T-Mobile, driven by the former's new owners Softbank.

BELLEVUE, Wash.--(BUSINESS WIRE)--T-Mobile US, Inc. (NYSE: TMUS):

First Quarter 2014 Highlights:

  • Total net additions of 2.4 million, marking the first quarter ever with more than 2 million net additions
  • Fourth consecutive quarter with over 1 million total net additions, now the fastest growing wireless company
  • Total branded net additions of 1.8 million including branded postpaid net additions of over 1.3 million
  • Total branded prepaid customer growth with 465,000 net additions
  • Record low branded postpaid churn of 1.5%, down 20 basis points sequentially and down 40 basis points YoY
  • Fourth consecutive quarter of pro forma sequential service revenue growth and a return to service revenue growth YoY on a pro forma combined basis
  • Adjusted EBITDA of $1.1 billion, down 12.2% sequentially due to the impact of significant acceleration in customer growth
  • Branded postpaid ARPU of $50.01, down 1.4% sequentially compared to a 2.9% decline in the prior quarter

T-Mobile US, Inc. (NYSE: TMUS) today reported first quarter 2014 results demonstrating continued strong momentum and record customer response to its Un-carrier moves. The Company has aggressively focused on eliminating consumer pain points and is delivering continued growth in its total and branded customer base through the successful execution of this strategy. In the first quarter, T-Mobile captured virtually all of the industry phone growth, while successfully taking market share from the competition.

T-Mobile reported 2.4 million total net customer additions with 1.8 million total branded net customer additions for the quarter, including branded postpaid net additions of 1.3 million and branded prepaid net additions of 465,000. T-Mobile was once again the fastest growing wireless company in America in the first quarter of 2014 with more than 1.2 million branded postpaid phone net additions, a result that dramatically outperformed the competition. The strong branded postpaid net addition performance resulted from continued momentum in gross additions, which were up 23% quarter-over-quarter and 136% year-over-year, and ongoing improvements in branded postpaid churn, which was 1.5% in the quarter, down 20 basis points quarter-over-quarter and down 40 basis points year-over-year.

“A year ago I promised that we would bring change to what I called this arrogant US wireless industry. We are delivering on that promise and our results reflect the growing customer revolution that we’ve ignited,” said John Legere, President and CEO of T-Mobile. “We are now approaching 50 million customers, added 2.4 million net new customers in the first quarter alone, and posted our fourth quarter of consecutive service revenue growth, while once again adding more net new postpaid customers than the rest of the industry combined!”

Executing on the Un-Carrier strategy to drive results:
T-Mobile’s Un-carrier moves have ushered in a consumer revolution, giving consumers a stronger voice since the roll out began in March 2013. The Company’s key Un-carrier initiatives were as follows:

  • On March 26, 2013, the Company announced its radically simplified unlimited “Simple Choice” service plan with no annual service contract. Device financing with the Equipment Installment Plan (EIP) provides qualifying customers with low out-of-pocket costs on some of the most popular devices available in the US wireless industry. As of the end of the first quarter of 2014, 75% of T-Mobile’s branded postpaid base was on Simple Choice/Value plans.
  • On July 10, 2013, the Company unveiled JUMP!™, a groundbreaking approach to more frequent phone upgrades. T-Mobile had more than 5.3 million customers enrolled in JUMP! at the end of the first quarter of 2014.
  • On October 9, 2013, the Company announced that it would make “the world your network – at no extra charge” - with unlimited data and texting worldwide in 100+ countries for Simple Choice customers. At the same time, T-Mobile announced that it had delivered nationwide 4G LTE in 233 metro areas covering 202 million people. Since then, Simple Choice with global data has expanded to 121 countries and destinations and 4G LTE coverage has increased to 284 metro areas covering more than 220 million people.
  • On October 23, 2013, the Company un-leashed tablets and revolutionized how customers buy and use tablets with free data for life. Customers can receive 200 MB of free data every month with any compatible tablet for as long as they own and use the registered device on T-Mobile’s network. In the first quarter of 2014, T-Mobile had 67,000 mobile broadband branded postpaid net additions, principally composed of tablets, compared to 69,000 in the fourth quarter of 2013.
  • On January 8, 2014, the Company announced that it would reimburse Early Termination Fees (ETFs) for individuals and families who make the switch to T-Mobile and trade in an eligible device. The plan also offers a trade-in value for customers’ phones. This program has seen unprecedented customer uptake with approximately 21% of branded postpaid gross adds taking the ETF offer in the first quarter of 2014.
  • In April 2014, the Company introduced 3 new programs - “Simple Starter,” “Tablet Freedom,” and “Overage Freedom” – that make our service plans and devices even more affordable, and we have eliminated all domestic overage charges for consumers, even those on legacy plans.

Operational and Financial Highlights for the First Quarter of 2014
T-Mobile ended the first quarter of 2014 with approximately 49.1 million customers, an increase of 2.4 million total customers from the end of the fourth quarter of 2013. T-Mobile significantly grew its total branded customer base, with 1.8 million net customer additions during the quarter. Branded postpaid net customer additions of 1.3 million, including more than 1.2 million phone net additions, continued the strong momentum seen in the previous three quarters, reflecting continued low branded postpaid churn and significantly higher gross additions. The Company’s network modernization program and strong execution of its Un-carrier strategy contributed to a record low branded postpaid churn rate of approximately 1.5% for the first quarter of 2014, down 20 basis points versus the fourth quarter of 2013 and an improvement of 40 basis points compared to the first quarter of 2013. The branded prepaid business exhibited improved customer growth with 465,000 branded prepaid net customer additions in the first quarter of 2014, driven by the success of MetroPCS and growth in the 30 expansion markets launched in 2013.

During the first quarter of 2014, the quality of T-Mobile’s customer base and receivables portfolio continued to improve as a result of the implementation of its Un-carrier strategy and the effect of credit tightening over the past two years. Service bad debt expense in the first quarter of 2014 was down 3% year-over-year and was down 13% quarter-over-quarter. 53% of EIP receivables were classified as Prime at the end of the first quarter of 2014, compared to 44% at the end of the first quarter of 2013 and 54% at the end of the fourth quarter of 2013. The slight sequential decline in EIP receivables classified as Prime was due to seasonal factors, most notably the tax season cash effect which drove a slight change in customer mix.

Total revenues for the first quarter of 2014 increased by 47.0% year-over-year, principally due to the inclusion of MetroPCS results in the first quarter of 2014. On a pro forma combined basis, total revenues for the first quarter of 2014 increased 15.3% year-over-year due to higher equipment sales and growth in service revenues. Total smartphone sales, including sales to branded postpaid and prepaid customers, were a record 6.9 million units in the first quarter of 2014, equivalent to 92% of total units sold, up from 91% in the fourth quarter of 2013. This represents a penetration of 81% of the total branded customer base at the end of the first quarter of 2014, up from 79% at the end of the fourth quarter of 2013. On a sequential basis, total revenues increased by 0.7% primarily due to growth in service revenues. The portion of branded postpaid customers on Value or Simple Choice plans was 75% at the end of the first quarter of 2014, up from 69% at the end of the fourth quarter of 2013.

Service revenues for the first quarter of 2014 grew by 33.3% year-over-year primarily due to the inclusion of MetroPCS results for the full quarter. Service revenues increased by 3.3% quarter-over-quarter primarily due to growth of the Company’s customer base, offset in part by increased adoption of Value and Simple Choice plans, which have lower monthly service charges than traditional bundled plans. T-Mobile’s service revenues have grown in each of the last four quarters on a sequential basis. On a pro forma combined basis, service revenues for the first quarter of 2014 increased 4.5% year-over-year. This represents a significant improvement over the fourth quarter of 2013, when service revenues declined by 1.1% year-over-year on a pro forma combined basis, and marks a return to year-over-year service revenue growth.

Branded postpaid average revenue per user (ARPU) decreased quarter-over-quarter by $0.69 or 1.4% to $50.01, an improvement compared to the quarter-over-quarter decline of 2.9% in the fourth quarter of 2013. Branded postpaid ARPU again declined on a year-over-year basis due to the increased adoption of Value and Simple Choice plans. However, the year-over-year decline in branded postpaid ARPU of 7.5% did show an improvement compared to the year-over-year decline of 8.6% in the fourth quarter of 2013. Branded postpaid Average Billings per User (ABPU), which consists of branded postpaid service revenues plus EIP billings divided by the average branded postpaid customers in the period, was $59.54 in the first quarter of 2014, up 3.9% compared to the first quarter of 2013 and up 1.3% compared to the fourth quarter of 2013. Branded prepaid ARPU for the first quarter of 2014 increased by $0.25 or 0.7% to $36.09 compared to the fourth quarter of 2013.

Adjusted EBITDA for the first quarter of 2014 was $1.1 billion, a 12.2% decline from the fourth quarter of 2013, reflecting increased equipment sales due to the significant acceleration in customer growth and the success of the Un-carrier 4.0 – Contract Freedom offer. Adjusted EBITDA margin was 20% compared to 24% in the fourth quarter of 2013.

Cash capital expenditures for the first quarter of 2014 were $947 million, up from $882 million in the fourth quarter of 2013 but down from $1.2 billion on a pro forma combined basis in the first quarter of 2013. Cash capital expenditures reflect T-Mobile’s continued investment in network modernization and 4G LTE deployment.

MetroPCS Combination
T-Mobile has continued to make rapid progress on the expansion and integration of MetroPCS. On July 25, 2013, the Company announced the strategic expansion of the MetroPCS brand with the planned launch of 15 new geographic markets. On November 21, 2013 the Company launched the MetroPCS brand in 15 further markets, bringing the total of expansion markets to 30. As of March 31, 2014, the Company has opened nearly 2,200 distribution points in these new markets.

The Company began selling T-Mobile-compatible devices to MetroPCS customers in the second quarter of 2013 through MetroPCS branded distribution points and has already transitioned approximately 53% of MetroPCS customers to the T-Mobile network. More than 50% of the MetroPCS spectrum has been re-farmed and integrated into the T-Mobile network at the end of the first quarter of 2014.

2014 Outlook Guidance
T-Mobile expects to drive further momentum while continuing to invest in profitable growth. With the success of our Simple Choice plan and the continued evolution of the Un-carrier strategy, branded postpaid net additions for 2014 are now expected to be between 2.8 and 3.3 million.

For the full year of 2014, T-Mobile now expects Adjusted EBITDA to be in the range of $5.6 to $5.8 billion.

Cash capital expenditures are expected to be in the range of $4.3 to $4.6 billion.

With this growth and rate plan migrations, the penetration of Value/Simple Choice plans in the branded postpaid base is projected to be between 85% and 90% by the end of 2014.

Quarterly Financial Results
For more details on T-Mobile’s first quarter 2014 financial results, including its “Investor Quarterly” with detailed financial tables and the required non-GAAP reconciliations, please visit T-Mobile US, Inc.'s Investor Relations website at http://investor.T-Mobile.com.

For comparison purposes, pro forma combined measures presented in this release include the combined results of T-Mobile USA and MetroPCS to reflect the business combination for the relevant periods. See Investor Quarterly for further details.

Michael Crider
Michael is a native Texan and a former graphic designer. He's been covering technology in general and Android in particular since 2011. His interests include folk music, football, science fiction, and salsa verde, in no particular order.

  • xsirxx

    Good for them! Keep adding T-Mobile. I will be one soon. Time to show Verizon and ATT that their prices suck!

    • h4rr4r

      Go for it, I just did. Works great and I got to buy my own phone without any carrier involvement. Then got a sim card from a store. They did not even need the IMEI number, so freeing.

      • xsirxx

        I am currently on Sprint so my phone wont transfer, otherwise I would be there today. I am waiting for the One Plus One or the Nexus 6. Cant wait though. My buddy and I were sitting next to each other running speedtests and he was getting 20.0mbps(T-Mobile) and I was getting 0.08mbps (roundabout) on LTE. He pays the exact same I do, so dollar for dollar, I think switching makes complete sense.

        • h4rr4r

          I just went ahead and bought a Nexus 5. If I really want a Nexus 6 I will sell the 5 to get it.
          You will be lucky to get a One by end of summer.

          • nofearofimaginarymen

            I did the same and only have 37 more days with sprint. I am looking forward to usable data speeds with reception.

        • bearballz

          I heard that! My contract is up in June and I'm really considering getting rid of Sprint and jumping on the T-Mo bandwagon.

          But who knows, I may be a Sprint customer again if this rumored merger between the two goes through.

          • https://plus.google.com/+TroyLeonard Troy Leonard

            I have a gut feeling that they will keep the tmo name. Like when Cingular bought att

    • NexusMan

      While Verizon and AT&T continue to show T Mobile it's service sucks.

      • Professor Hubert J. Farnsworth

        At least T-Mobile is really committed to improving their network. They may not have the best coverage but their recent 700MHz spectrum purchase shows they're not only changing things up uncarrier wise.

      • xsirxx

        Well in my area T-Mobile is actually just as good. I am lucky that I dont travel so for me it makes sense. If they are terrible in other areas, it wont bother me. I am not going to pay out the nose for that one time in 10 years that I might maybe ever visit BFE city, BFE State....

        • h4rr4r

          T-mobile is fine if you are anywhere near civilization. If I drive two hours on "highways", really 2 lane roads, I can find a place where I get voice only.

      • h4rr4r

        Not where humans actually live.

        • NexusMan

          Lol. Verizon was recently rated #1 in service in 48 of the 50 states. With T No coming in dead last, in EVERY state. And, there are tons of humans where I actually live, and T mobile sucks here.

          • h4rr4r

            Clearly they did not ask me.
            Sitting in my living room the LTE speeds for T mobile where much better.
            Those network maps are all heat maps of where most people live. Choosing to live in the boonies of a flyover state will limit your service choices. As a quick example no one has coverage in lots of Montana. This is because almost no one lives there. I just checked the VZW map to confirm.

          • NexusMan

            They didn't ask me either. They looked at the states as a WHOLE, not little segments here and there. T Mobile is terrible near me, but I am absolutely aware that there are people in other areas of my state where T Mobile is a better option. The thing is, however, that Verizon's reach of optimal service is far greater in 48 of the 50 states, than T Mobile's....correction, all 50 states, but in 2 of the 50, AT&T beat out Verizon.

      • Steve Freeman

        Ya know what though, I live in the suburbs of Cleveland. Not even in the outer, more slightly rural areas. Right in the suburbs. And I frequently get anywhere from 1-3 bars in most places I go. The gym I go to, right in the middle of a very popular shopping/entertainment/dining area, I get maybe 1-2 bars if I'm lucky. More often than not though I get 1x. In the shopping area itself, 1-2 bars. Verizon's touted service isn't really all that great anymore. And it's been consistently this bad for the last several years.

        • Fiorta

          I live same exact area as you. I switched to TMo. Pretty good service in Cuyahoga, Lake, Lorain, Summit, Portage... Inside buildings is hit or miss tho

          • Steve Freeman

            Yeah, and I can deal with 2-3 bars, it's just the spotty coverage inside my gym that gets really annoying since I always have Pandora going.

      • Cuvis

        T-Mobile has issues with their coverage area, but where they do have coverage, their service is head and shoulders above anybody else's. Seriously, I get ludicrous speeds with my phone as long as I'm in town.

      • Devo

        I live in the middle of no where, and in my house, I have to leave my Verizon phone I get like 1/4 a bar, and ATT phones get like half a bar. Bought my dad a Moto G, paired it up with T-Mobile, and bam, full service, great reception, and for half the price of my plan stuck on airplane mode.

      • Jephri

        Keep telling yourself that. It takes the sting of paying 20 to 40 percent more for a plan with data caps and overages.

        • NexusMan

          I have a corporate discount and Unlimited Data. So, try again.

  • Christofftofferson

    "T-Mo now serves an estimated $49.1 million customers"

    Dollar sign doesn't need to be there.

    Go t-mobile though! They've also acquired the 700mhz spectrum now haven't they?

    • Cory S

      I really thought they'd hit 50 dollars in customer this quarter. Ah well.

  • agl82

    Postpaid Subs by Carrier (Q1 2014):

    Verizon - 97,273,000

    AT&T - 73,291,000

    Sprint - 30,257,000

    T-Mobile - 23,622,000

    Sprint and T-Mobile, even as a combined company, have a huge uphill climb to even get close to AT&T's postpaid subs. I'm an AT&T subscriber, but I'm rooting for T-Mobile since industry disruption means lower prices for everyone.

    • Daniel

      True... Though if T-Mobile continues at this pace they will pass Sprint in a year or two.

  • Guest

    Postpaid Subs by Carrier (Q1 2014):

    Verizon - 97,273,000

    AT&T - 73,291,000

    Sprint - 30,257,000

    T-Mobile - 23,622,000

    Sprint and T-Mobile, even as a combined company, have a huge uphill climb to even get close to AT&T's postpaid subs.

    • Cuvis

      Why are you only counting postpaid?

      • Steve Freeman

        It's like only counting the drive-thru sales numbers for a fast food joint...

      • KojiroAK

        Because Prepaid can switch way more easily, so counting with this is pretty risky.
        If it's prepaid you really just pay what you used it's even more risky.

        • Cuvis

          But considering T-Mobile doesn't even do contracts anymore, the exact same thing is true of postpaid users.

          And not all prepaid users are on pay-as-you-go plans. Some of them pay monthly just like postpaid users.

  • modplan

    Michael, I'm not sure you know what "raking in the dough" means.

    Despite the impressive customer additions: "Overall, T-Mobile posted a quarterly loss of $151 million, or 19 cents a share, compared with a year-earlier profit of $107 million." That's nearly 150% negative earnings growth YoY.

    • Cuvis

      I'm betting a lot of that loss was tied to the MetroPCS acquisition.

      • vvtim

        Unless they took a loss in the value of the MetroPCS acquisition (which they would write off for tax reasons) they wouldn't report it as negative earnings financially.

    • Christofftofferson

      Technically they still are "raking in the dough" - their revenue increased, i.e. more dough.
      They just don't have any profits.

      • vvtim

        They are raking in the dough, they're just plowing it out.

    • KojiroAK

      more like 241% down in earnings.
      They went down from 107 to -151 so the difference is 258.
      (258/107)*100

      () just for clarification, not actually needed.

    • Jephri

      They paid cancelation fees for over a million customers. That will hurt in the short term but lead to long term gains.

  • RBP

    All hoopla about new customers and no mention of earnings, profits or losses. Its easy to get customers if you sell your products at a loss. But how long can you do this, depends on how many suckers you can get to keep loaning you money.

    • MJ

      Hmmmm Paying half what I was paying Verizon for service makes me a sucker? Interesting...

      • Steve Freeman

        ...Why are you having a conversation with yourself?

    • Kidney_Thief

      Amazon wasn't profitable for their first seven years, and here they are, still surviving. Profits and losses aren't the only indicators of success.

    • Daniel

      Trading profits in the short term for long term gains is well worth it and is exactly what T-Mobile is doing... The CEO constantly says it...
      Plus they are not taking loans they have money in the bank.

      It is a long term investment.

  • Fiorta

    Now upgrade the network!

    • Daniel

      700MHZ

  • Jephri

    A T-mobile & Sprint merger would create the largest company in America passing Verizon. Yuo think uncarrier is putting pressure on big red and the death star now, wait until they are the number 2 and 3 carriers.

  • David Peterson

    Good guy T-Mobile

    They knew they couldn't compete WITH the giants so they differentiated from them and it is paying off for them and for US customers everywhere (it is forcing some competition)

  • Nick

    I'm disappointed by this news. I've been a big fan of T-Mobile's uncarrier policies, but operating at a loss isn't the way to create sustainable change in the industry.

    Here is how I fear this will play out: T-Mobile continues operating at a loss to aggressively acquire customers, thus making themselves more attractive for acquisition by Sprint. Sprint buys T-Mobile, and then, to make their acquisition profitable, they begin rolling back T-Mobile's more consumer friendly policies.

    These policies may be consumer friendly in the short term, but it all leads up to dumping us into a carrier that we didn't choose via acquisition. Sure we can leave, but look at the options we are left with. It's not like Sprint will have to try hard to keep their new customers.

  • kippswanson

    My wife and I are part of that. Switched from Sprint and couldn't be happier. Die Sprint, DIE!

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