T-Mobile Grows Revenue in 2Q16, Adds 646K Postpaid Phone Customers

The company's Q2 total revenue rose to $9.2 billion from $8.2 billion one year ago, while its customer pool swelled to 67.4 million, up from 63.3 million a year ago.

T-Mobile, Q2 2016, revenue, net income, smartphones, postpaid additions, prepaid additions, mobile carriers, Verizon, AT&T, Sprint

T-Mobile's growth continued in the second quarter of 2016, with increases in revenue, profit and mobile postpaid customers as the mobile carrier appears to maintain ongoing success with its "Un-carrier" messages to consumers.

For the second quarter, which ended June 30, the company reported total revenue of $9.2 billion, including service revenue of $6.8 billion, which are up 12.8 percent and 12.1 percent, respectively, from $8.2 billion total revenue and $6.1 billion service revenue in the same quarter of 2015. The carrier's net income of $225 million, however, is down from $361 million in the same quarter one year ago.

T-Mobile reported its Q2 earnings in a conference call on July 27.

The carrier's total revenue of $9.2 billion beat the $8.98 billion consensus average of a survey of financial analysts, while its service revenue of $6.8 billion met analysts' expectations, according to the company.

Diluted earnings per share were 25 cents for Q2, which is down from 42 cents a share a year ago, primarily due to higher interest expenses and lower interest income in the quarter as well as other factors.

T-Mobile added 646,000 new mobile phone customers in the quarter, as well as 476,000 new prepaid customers and 244,000 postpaid mobile broadband customers, giving the company 67.4 million subscribers, up from 63.3 million customers a year ago. The total of 1.9 million net customer adds is the company's 13th consecutive quarter of over 1 million customer additions, according to the carrier.

The company's postpaid mobile customer churn rate was 1.27 percent, which was down from 1.33 percent in the same quarter a year ago. Its prepaid customer churn rate was 3.91 percent, down from 4.93 percent in 2015.

"We outperformed the competition again on every key metric, while delivering the best postpaid phone churn numbers in our history," John Legere, the president and CEO of T-Mobile, said in a statement. "Quarter after quarter this team continues to deliver results that are the best in the business despite the competition's best efforts to compete."

The company's Q2 adjusted EBITDA increased by 36 percent to $2.46 billion from a year ago, due to growth in the customer base, lower losses on equipment and other factors, according to the carrier.

Capital expenditures for the quarter totaled $1.3 billion, which were up from $1.2 billion in the second quarter of 2015.

Several IT analysts told eWEEK that T-Mobile's performance for the quarter was generally positive.

"T-Mobile's strategy of 'Un-carrier' continues to work," said Jack E. Gold, principal analyst of J. Gold Associates. "It had some major gains in new customers, growing faster than Verizon and AT&T in subscribers. I expect a lot of the gains are due to the cost aggressiveness of T-Mobile's offerings. But also important is the major gains that T-Mobile has made over the past two to three years in improving their service, which used to be well below that of the major competitors."

At the same time, though, the company's net income is down, "which seems to be a reflection of increased expenses, especially in new investment of equipment and spectrum," said Gold. "That is not necessarily a bad thing, as it could help overall in the market, but it's no doubt an issue for investors who like to see improving numbers, not reducing numbers."

The bottom line is T-Mobile seems to have turned the corner and continues to pick up subscribers, and importantly seems to be growing ARPU as well (a good sign give its price-cutting direction). The question is, will the positive momentum continue in a mature, saturated market?

Another analyst, Maribel Lopez of Lopez Research, told eWEEK that "many people counted T-Mobile out but its value proposition seems to be working. It's holding its own against big competitors like AT&T. For example, AT&T has 2.1 million wireless net adds in Q2, while T-Mobile added 1.9 million total net adds."

Dan Olds, principal analyst at Gabriel Consulting Group, said the carrier's latest results show that its message to customers is working.

"I think this is pretty good," he said. "They are truly cheaper than competitors and are able to deliver good service at an inexpensive price. Their ads against their competitors are really bearing fruit. And their EBITDA rising by 36 percent, that's a huge number. They have great margins and they are still adding significant numbers of users at the same time."

Steve Vachon, a telecom analyst with Technology Business Research, said that while the carrier's Q2 numbers are significant, he warned that there are still issues that need to be addressed. "A concern for T-Mobile is its potential to sustain long-term revenue growth as the company offers a limited portfolio of services outside its core consumer mobility segment," said Vachon. "Whereas AT&T and Verizon have new business segments they can rely on such as digital advertising and media to grow revenue in light of the saturating U.S. wireless phone market, T-Mobile's options are currently limited."

One area where improvements might be occurring is in the internet of things marketplace, where T-Mobile is still lagging significantly behind AT&T and Verizon, said Vachon. That could be changing due to its recent partnership with Twilio and investments in 5G that will position T-Mobile to power advanced IoT connectivity to a broader base in the future, he said.