T-Mobile reported 673,000 postpaid phone net additions for the third quarter, in line or slightly higher than analysts forecast, with growth in its Magenta brand said to be the strongest in the company’s history.
T-Mobile’s net adds compare with AT&T’s 893,000 and Verizon’s 429,000 for the quarter. T-Mobile is the last of the three nationwide U.S. carriers to report third-quarter results; up-and-coming fourth player Dish Network reports on Thursday.
T-Mobile was given some leeway on net adds this quarter due to the security breach in August, which analysts figured would affect T-Mobile’s metrics for the quarter. In a brief update on that matter, T-Mobile CEO Mike Sievert said the investigation is now complete, and the company took “a number of steps” to respond. A cyber transformation office is now reporting directly to him, among other initiatives.
RELATED: Is T-Mobile’s data breach going to hurt subscriber metrics?
For those looking for evidence to support the bull case for T-Mobile, of which there are many, Sievert didn’t disappoint, noting that “we delivered our highest ever postpaid phone net adds on the Magenta brand year-to-date through Q3, our highest ever in company history.”
This year, even after normalizing for Sprint transfers into T-Mobile, “the un-carrier strategy is in full force” and “firing on all cylinders,” as it works to integrate the higher-churning Sprint base, he said. “If the Sprint base had the same churn as our Magenta base, our phone net adds in Q3 would have been about 1.2 million, way ahead of anyone else in the industry,” Sievert said.
The integration of Sprint’s customer base and network infrastructure is a big part of T-Mobile’s transformation. Over half of Sprint customers are at least partly migrated, and of those Sprint customers who have made the full migration to T-Mobile, their churn already is on par with the legacy T-Mobile Magenta customers, according to Sievert.
In terms of decommissioning cell sites, T-Mobile President of Technology Neville Ray said they’re making “great progress” in 2021. However, “our goal is to substantially complete our decommissioning activity across the network inside 2022… ’22 is going to be our big year… There will be a tail, a positive tail as we move into the second half.”
Promotions & growth sustainability
Sievert also used his introductory remarks during the company’s third-quarter conference call to address some concerns floating around out there about the promotional environment and about the source and sustainability of recent industry growth.
RELATED: T-Mobile blows through Q2 with 627K net phone adds
As for where growth in the industry is coming from, he said T-Mobile has a diversified growth opportunity in under-penetrated and new markets. Whereas AT&T and Verizon have been in smaller and rural areas, as well as grabbed their share of the enterprise market, these are newer markets for T-Mobile, so they represent areas of growth.
One way to “cut to the chase” is to look at accounts instead of lines. “Our postpaid net new accounts in Q3 doubled year over year, with our highest Q3 account growth in seven years even while in the thick of our integration. We’re up more than 1 million net new accounts year over year,” he said.
“We did this while Verizon had no account growth year over year and AT&T didn’t disclose accounts. What’s more, we see significant opportunities ahead. In smaller markets and rural areas, we’re leading America into the 5G era as we march toward covering 300 million people with Ultra Capacity 5G by the end of 2023,” a time by which others only aspire to cover 175 million to 200 million people.
RELATED: AT&T touts wireless health, gains 928K postpaid phones in Q3
Basically, T-Mobile is bringing the same 5G playbook to the smaller markets and rural areas that it used in the larger markets, "that took us from No. 4 to No. 1 in the major metros," Sievert said. However, this time, in the smaller markets, it’s not just bringing a competitive offering. “Our goal is to bring a superior one,” anchored by the 5G advantage, he said.
Sievert said the 5G phones that his rivals are selling at AT&T and Verizon perform very much like the 4G phones consumers already use. T-Mobile’s Ultra-Capacity 5G, which taps into the 2.5 GHz mid-band spectrum from Sprint, reaches more than half the U.S. today and speeds are rocking in the realm of 400 Mbps on average, according to Sievert.
Pressed by analyst Craig Moffett about what’s making the industry grow the way it is, Sievert said: “I don’t think we have all the answers as to what’s driving account growth or line growth over at all of our competitors and you don’t see quite the same amount of transparency. It’s one of the reasons why we decided to start talking much more about accounts and about ARPA because there’s no ambiguity in that. Our 268,000 net new account relationships on the postpaid side was the largest in seven years for a Q3.”
At T-Mobile, the growth also isn’t attributable to the FCC’s Emergency Broadband Benefit (EBB) program because that’s accounted for in its Lifeline business and not in its subscriber rolls. It’s also not due to sub-prime customers in the mix, Sievert said.
Chasing cable customers
Like Verizon, T-Mobile is making big efforts to go after customers traditionally served by cable by using fixed wireless access (FWA) technology. T-Mobile mails a gateway to customers, which is self-installable and according to the carrier takes 15 minutes to connect. T-Mobile’s FWA home internet is currently available to 30 million households in roughly 600 towns and cities.
RELATED: Verizon beats expectations in Q3
T-Mobile has set a goal of 500,000 subscribers by the end of 2021, and executives said that target is within sight. T-Mobile added about 110,000 home broadband customers during the quarter, roughly double Verizon’s 55,000.
In fact, two-thirds of T-Mobile’s net adds came from urban and suburban areas, which is traditional cable territory, Sievert said. In addition to seeing continued momentum from people coming from cable and fiber providers, it’s also coming from other sources, such as DSL and satellite, in rural markets, according to T-Mobile EVP of Emerging Products Dow Draper.
“T-Mobile is guiding to around 390k FWB adds in 4Q21 – that is a fairly significant step-up in pressure from 3Q21, particularly if Verizon also sees a 3-4x pick-up in the pace of adds,” wrote New Street Research analyst Jonathan Chaplin of the fixed wireless broadband segment. “To be clear, we doubt many of the FWB adds will come from cable or fiber, but they may well be taking share from DSL. This leaves fewer DSL churners for cable to capture and is likely part of the reason Cable is seeing fewer connects.”
Here are some other metrics from T-Mobile’s third-quarter report:
- Prepaid net customer additions for the third quarter totaled 66,000 compared with second-quarter prepaid net adds of 76,000 and first-quarter net prepaid adds of 56,000. T-Mobile ended the third quarter 2021 with a total of more than 106.9 million customers.
- Postpaid phone ARPU was $48.06.
- Postpaid phone churn was 0.96%; prepaid churn was 2.9%.
- Service revenues of $14.7 billion grew more than 4% year over year; net income was $691 million and adjusted EBITDA was $6.8 billion.
- Once again, T-Mobile raised 2021 guidance across the board, something it’s done the prior two quarters. It now expects postpaid net customer additions to be between 5.1 million and 5.3 million, an increase from its prior guidance of 5.0 million to 5.3 million. Core adjusted EBITDA is expected to be between $23.4 billion and $23.5 billion, an increase from prior guidance of $23.0 billion to $23.3 billion.