T-Mobile Q3 2015 Revenue Misses Analyst Expectations

Revenue tops $7.8 billion, up 7 percent from Q3 2014, but misses the $8.3 billion that was expected by a consensus of Wall Street financial analysts.

T-Mobile, Q3 2015, revenue, analyst expectations, profit, net income, total net adds, mobile customers, mobile carriers, Verizon, AT&T

T-Mobile earned $7.8 billion in revenue and $138 million in net income in the third quarter of 2015 ending Sept. 30—both up from the prior quarter and the prior year—but missed analyst expectations that called for the company to bring in revenue of between $8.1 billion to $8.6 billion for the quarter.

At the same time, T-Mobile grew its mobile customer base with 2.3 million total net adds, including 1.1 million branded postpaid net adds, giving the company a total of 61.2 million mobile customers, according to its financial report, which was announced Oct. 27.

The company's Q3 earnings per share was 15 cents per diluted share, which is up from a 12 cent per share loss in the same quarter one year ago. Consensus expectations by financial analysts, however, were looking for EPS of 26 cents per share based on the average of the analyst reports.

The net income of $138 million for the quarter was a large improvement from the $94 million loss for the same quarter one year ago. The $7.8 billion in revenue was up 7 percent from the $7.4 billion booked one year ago, according to T-Mobile. Service revenue hit $6.3 billion of that total, up 11 percent from $5.7 billion one year ago.

"We've had 10 quarters in a row with over 1 million net new customers, 5 with over a million branded postpaid customers and a total of 2.3 million new customers this quarter alone," John Legere, the president and CEO of T-Mobile, said in a statement. "Our momentum is strong and our incredible customer growth is translating directly into solid financial growth which makes it crystal clear that putting customers first is just good business."

T-Mobile's customer churn rate for Q3 was 1.46 percent, down from 1.64 percent for the same quarter one year ago, but up from the 1.32 percent churn rate in the second quarter of 2015.

In July, T-Mobile reported second-quarter earnings of $361 million in net profit on $8.2 billion in revenue and higher than expected diluted earnings of 42 cents per share. T-Mobile's Q2 net profit was down 7.7 percent from the profit it posted in the same quarter in 2014, but it was 350 percent higher than the $63 million loss it posted in the first quarter of 2015. The company's Q2 revenue of $8.2 billion was up 13.8 percent from Q2 in 2014 and up 5.2 percent from the $7.8 billion posted in Q1 of 2015.

Analysts had mixed views about T-Mobile's latest earnings figures.

Bill Menezes, a mobile carrier analyst with Gartner, told eWEEK in an email reply to an inquiry that "T-Mobile is showing that for now it can post sustainable, profitable growth."

Menezes said that the year-over-year performance figures are more important than the figures for sequential quarters, adding that the company's ability to be "profitable while driving customer additions via price promotions speaks well for its prospects as a standalone company. Further, although its churn level remains higher than the market leaders AT&T and Verizon, continued reduction in churn means that once customers sign up for T-Mobile they are not switching to a rival carrier at the rate they used to. Given its 'no contract' value proposition, that's a sign T-Mobile's network service continues improving."

Jeff Kagan, an independent telecom analyst, told eWEEK in an email reply that Legere started T-Mobile's growth wave when he arrived several years ago. "T-Mobile has been growing over the last few years and that's been good for the company and the investors."

The problem with rapid growth is that it is always short term, wrote Kagan. "The only question is when will this T-Mobile growth wave start to slow? These quarterly numbers say we may be seeing the T-Mobile growth wave start to slow. Don't take this the wrong way, T-Mobile is still growing, however not at the rate that investors expect."

Kagan said that "investors had higher expectations than T-Mobile was able to produce this quarter. We will have to wait and see if T-Mobile's growth picks up again or whether it starts a downward slide going forward."