T-Mobile US Inc (TMUS) Adds Postpaid Subscribers Even as Revenue Missed

T-Mobile US Inc (NYSE:TMUS) is  feeling the pinch of its increased costs in attracting more subscribers which it hurt its profit deeply in the September quarter. That was because there was a difference of 50% between the actual and the expected earnings per share. Also, its revenue missed by a margin of 6.0% in the third quarter. The company’s leasing program is partly blamed for its failure to deliver the expected revenue. That obviously impacted the equipment revenues unfavorably while higher than estimated network decommissioning costs were also spent. However, there are also some positive news from the third quarter results like the positive free cash flow and taking market share with favorable postpaid additions.

Subscribers Additions

T-Mobile US Inc (NYSE:TMUS) was able to add over one million fresh subscribers in the third quarter thanks to the promotions, as well as, the price cuts announced by it. The company added 1.1 million post paid subscribers of the total 2.3 million fresh subscribers. Postpaid subscribers are considered the most important due to their multiple mobile devices, use of data, and strong credit. As a result, the telecom service provider has boosted its subscribers’ additions outlook to 3.8 – 4.2 million new post-paid subscribers from 3.4 – 3.9 million estimated earlier for the current year. The telecom firm has been adding more mobile phone subscribers than the rest of the three put together.

T-Mobile US Inc (NYSE:TMUS) attracted the customers with the ‘uncarrier’ campaign by offering pocketbook-friendly features for several months now. That included monthly rollovers of any unused data, as well as, free data roaming in Mexico and Canada. On top of these, its CEO, John Legere, made sure that it was grand success with his imitable style of marketing, as well as, profanity pinch. The trend has not only continued in the September quarter but also in the rest of the period of the current year. Of the total subscribers, 843,000 preferred to pay month-end, which were regarded as a lucrative base in respect of postpaid customers were concerned. On the other hand, Verizon Communications Inc. (NYSE:VZ) could only manage to get a little over half of the number of net fresh postpaid customers whereas AT&T Inc. (NYSE:T) lost such type of customers.

Turnover Rate Drops

The uncarrier campaign, which has been there for about 30 months, is also helping its bottom line. While T-Mobile US Inc (NYSE:TMUS) earnings were 15 cents a share for the third quarter compared to a loss 12 cents per share in the year-ago quarter, its revenue advanced 7% to $7.8 billion. Street predicted the third biggest telecom carrier to earn 30 cents a share and $8.3 billion revenue. Despite missing the Street expectations, the company has retained its adjusted EBITDA outlook of $6.8 – $7.2 billion for the current year. Reports suggest that customers liked the service of the company. That could be seen from the way the turnover rate dropping to 1.46% from 1.64% in the previous year quarter. The turnover rate measures the number of customers leaving every quarter.

Positive Quarter

Most of the analysts see the third quarter results of T-Mobile US Inc (NYSE:TMUS) positively despite EPS and revenue giving a miss. Also, most of them blame the equipment sales revenue for missing the estimations. For instance, Evercore ISI analyst, Jonathan Schildkraut, said that he was expecting the company to deliver revenue of $2.0 billion while the actual revenue was $1.4 billion only. He said the third quarter was positive because of key inflections, ongoing network enhancements, and strong subscribers’ metrics. Similarly, Wells Fargo & Co (NYSE:WFC) analyst, Jennifer Fritzche, said that EBITDA margin expansion and customer growth were the key factors for a solid quarter. He said that the reiteration of positive free cash flow for the current year was an important indicator. The company is focusing more on margins and cash flow than subscribers’ growth.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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