T-Mobile 3Q16 Revenue, Net Income Rise From Year Ago

T-Mobile added 851,000 postpaid phone customers in the quarter, plus 684,000 prepaid customers, bolstering its Q3 results.  

T-Mobile, Verizon, AT&T, revenue, net income, Q3 2016, smartphones, mobile carriers

T-Mobile brought in net income of $366 million on $9.2 billion in revenue in the third quarter of 2016, as well as 851,000 net postpaid phone customer additions, all up substantially from the same period one year ago.

The $366 million in net income is up 165 percent from $138 million one year ago, due to $122 million in spectrum gains and a 5.1 percent increase in actual service revenue, according to T-Mobile's figures, which were announced on Oct. 24. Total revenue is up 17.8 percent from a year ago when the company brought in $7.8 billion in revenue.

In addition, the mobile carrier booked 851,000 postpaid net add phone customers, as well as 684,000 net add prepaid customers in the quarter. When also figuring in new postpaid mobile broadband customers and new wholesale customers, T-Mobile brought in 1.97 million new customers in the quarter, according to the company's figures.

T-Mobile's customer churn rate dropped to 1.32 percent for the quarter, down from 1.46 percent one year ago.

Earnings per basic share for Q3 are 43 cents per share, which is up from 15 cents per share in Q3 of 2015.

"That's 14 quarters in a row that T-Mobile has won share from the competition," John Legere, president and CEO of T-Mobile, said in a statement. "The Un-carrier is delivering. We took share and grew our customer base while producing both financial growth and shareholder value. Most importantly, we are delivering results for both customers and shareholders alike."

T-Mobile now has 69.4 million total customers, including 30.4 million postpaid phone customers, 2.9 million postpaid broadband customers, 19.3 million prepaid customers and 16.9 million wholesale customers, which is up from 61.2 million total customers one year ago.

The company sold 8.7 million smartphones in Q3, up from 8.1 million a year ago.

Bill Menezes, an analyst with Gartner, said T-Mobile "continues to post strong net add figures" to its customer numbers, especially at the expense of its key competitors. "A look at what AT&T and Verizon did in Q3 in the same respect and it's easy to connect the dots," said Menezes. "T-Mobile's competitive pressure on the U.S. consumer wireless market is taking a toll on its larger, primary competitors. At some point T-Mobile will reach equilibrium, but if it keeps succeeding in acquiring customers from the other carriers that point could still be far in the future."

On the negative side for T-Mobile, its "high [customer] churn figures have a cost and although it continues to drop year over year it remains substantially higher than AT&T and Verizon," said Menezes. "This raises the question of whether there is a 'new normal' environment in which the ease of changing carriers due to unsubsidized, unlocked phones will keep T-Mobile's postpaid churn higher than its primary competitors, and whether it can retain long term most of the customers it's now snatching from AT&T and Verizon."

The company's healthy profit and continuing profit growth quarter to quarter "point to a sustainable strategy which will continue to bedevil its bigger competitors as they work to create new sources of revenue while wireless flattens or declines," he said.

Rob Enderle, principal analyst at Enderle Group, told eWEEK that T-Mobile's "unusually strong earnings [are] showcasing a strong contrast between a strategy focused in growth versus one betting on questionable acquisitions. T-Mobile is becoming the company to beat in the segment."

One reason for the company's gains in the quarter, said Enderle, is that "buyers like a value and prefer a vendor that appears focused on them. Verizon appears to be bleeding customers to T-Mobile at an alarming rate."

Another analyst, Charles King of Pund-IT, said that T-Mobile's healthy Q3 results "suggest that the company is capturing customers' wallets, along with their hearts and minds. That's great news for the company and its shareholders but also speaks to the value of the unconventional strategizing of CEO John Legere and his executive team."

While competitors like AT&T and Verizon "try to reinvent themselves with costly, high-profile acquisitions, T-Mobile is doubling down on increasing the value and flexibility of its products and services," said King. "Given these latest results, that approach is resonating with the company's and with competitors' customers."