Amidst news of the Department of Justice's approval of its merger with Sprint, T-Mobile has announced a record second quarter with big gains in both subscribers and revenues. In its earnings call, the carrier tooted its horn about its rapid pace of capital expenditure related to 600MHz and millimeter wave spectrum and painted a couple of insights to its spectrum and MVNO sale to Dish.
As the company made public earlier today, Dish has agreed to receive Sprint's entire 800MHz portfolio as well as all of its prepaid operations (Boost Mobile, Virgin Mobile, and Sprint Prepaid) for $5 billion. T-Mobile CEO John Legere made the point that this kept all of Sprint's 2.5GHz assets — prized mid-band space for its 5G network — in the merged company.
As part of the deal, customers of Dish and its MVNOs can roam on T-Mobile's network, including its 5G grid, for the next 7 years. In return, T-Mobile is trying to work out a roaming agreement for Dish's own 600MHz spectrum, but that's still up in the air. T-Mobile also has the option to lease some of the 800MHz spectrum it turned over for the next 2 years. Importantly, T-Mobile will also relinquish control to Dish of cell sites that it plans to deactivate as part of the merger, potentially cutting down the latter's network build-out costs — about 20,000 sites are on T-Mobile's chopping block right now, but not all of them are guaranteed to go to Dish.
T-Mobile president Mike Sievert said that the spectrum and MVNO sale has essentially put Dish in the position to get started with prepaid service almost immediately and to speed up the launch of its own postpaid service. Being able to notch that 600MHz roaming deal would require Dish to build on its own spectrum and it would have the cell sites to do so, quick and easy. Both Sievert and Legere said that the deal put matters into Dish's hands, essentially whiffing on questions regarding rumors that Google would help set up Dish's carrier business — perhaps, in the process, breaking away Google Fi's existing network leasing agreements with both Sprint and T-Mobile.
Taking the Dish agreement into consideration, Legere remains confident that the combination with generate $43 billion in synergetic savings. Final approval from the government for the merger is expected in Q3. The deal is forecast to close before 2020.
T-Mobile is still working on turning on towers with its 600MHz licenses and was able to cover 1.2 million square miles as of June. It also was able to launch a 5G millimeter wave network last month and was able to spend more than $800 million to grab more 24GHz and 28GHz licenses.
All of this news is built on record performance for what's typically a weak quarter for the industry. Total service revenue was up 6.2% year-on-year to $8.4 billion with net income of $939 million, a 20% jump. It posted a net addition of 1.8 million subscribers — the 25th consecutive quarter of seven-digit growth — taking two-thirds of the postpaid device additions in the wireless market. Average revenue per customer was down about 1%, though that ballooning payer base obviously offsets that drag. The lower-priced plans for seniors and veterans are helping to reduce port-outs.
The company has boosted its full-year guidance for customer additions by 10% on average to between 3.5 million and 4 million. TMUS shares are up about 4.8% late in Friday trading.