T-Mobile: 2020 best year yet with 5.5M postpaid net adds

Mike Sievert T-Mobile
T-Mobile CEO Mike Sievert said his company led the industry on customer growth and is the only major player to grow profitability.

T-Mobile’s success in the fourth quarter of 2020 was expected, as the operator previously announced 824,000 postpaid phone net adds, but it reported more metrics on Wednesday, saying 2020 was its best year yet.

Of course, it’s still got a long way to go in incorporating Sprint subscribers and switching all that traffic over to the T-Mobile network, eventually shutting down Sprint’s network. But it’s running full speed ahead, saying it delivered $1.3 billion of synergies in the full year 2020, exceeding guidance. The plan is to cover 200 million people by the end of 2021 with mid-band 5G.

T-Mobile reported its highest ever total postpaid net additions of 5.5 million in full-year 2020. For the quarter, the company had total net additions of 1.7 million. Prepaid net customer additions were 84,000 in the fourth quarter and 145,000 for the full-year 2020.

Total revenues were $20.3 billion in Q4 and $68.4 billion for the full-year 2020. Net income for the quarter was $750 million, and $3.1 billion in the full-year 2020.

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Postpaid phone churn was 1.03% in the fourth quarter compared with 0.90% in the third quarter of 2020. Prepaid churn was 2.92% compared with 2.86% in the third quarter.

“T-Mobile delivered the industry's best churn on our flagship T-Mobile brand, and we did it by delivering the best-in-class experiences across network, value, and customer service,” said CEO Mike Sievert in prepared remarks. “Although we don't normally report on T-Mobile brand-specific churn, I did want to make that point clear. T-Mobile went from worst to first on churn… We know how to apply that same formula to our much higher churning Sprint-branded customers, creating a big potential tailwind on future performance once this integration is substantially complete.”

One might think, with Sprint’s churn rate so high – in the 2% range – that T-Mobile’s churn rate would reflect that in its quarterly and year-long report. But analysts at MoffettNathanson pointed out that’s not what’s happening.

“T-Mobile continues to make fast work of lowering Sprint’s churn rate,” wrote analyst Craig Moffett in a report for investors Wednesday. “We’ve noted in the past that the casual observer might imagine that the composite churn rate for New T-Mobile would be something like a blend of T-Mobile’s legacy churn rate (low) and Sprint’s legacy churn rate (high). Today’s results should remind investors (again) that it doesn’t work that way. With one less place for defectors of each of the two to go, we had expected the blended churn rate to almost immediately rival the best-in-class churn rate of legacy T-Mobile alone. That’s precisely what they have delivered.”

Like a lot of Wall Street analysts, Moffett is bullish on T-Mobile, with a “Buy” recommendation and price target of $164; it’s closing price on February 3 was $129.37.

“T-Mobile’s pre-reported subscriber results were in line or better when they were first disclosed in early January. Since then, AT&T’s better-than-expected results, driven by extraordinary retention rates on the back of an exceptionally rich free iPhone offer, have raised questions, however,” Moffett wrote. “Their results were almost as good as T-Mobile’s.”

T-Mobile reported that 25% of Sprint postpaid customer traffic has been moved to the T-Mobile network, up from 15% in the last quarter. It’s now covering 106 million people with its Ultra Capacity 5G, which uses the 2.5 GHz spectrum acquired via Sprint. That’s in addition to the 280 million people covered by its Extended Range 5G, which uses 600 MHz spectrum.

RELATED: T-Mobile reports record 1.9M net adds in blowout Q3

Whereas last year it was touching and upgrading “many, many thousands” of sites to the higher-speed 5G, this year, that’s moving to “tens of thousands” of sites. “It’s a massive undertaking,” Sievert said.

Usage on the part of 5G customers is about 15% higher than those without 5G, according to T-Mobile President of Technology Neville Ray. T-Mobile’s “Ultra Capacity” moniker refers to mid-band and millimeter wave spectrum, although it’s mostly 2.5 GHz, and its Extended Range is for coverage using 600 MHz spectrum.

Customers do talk about the speeds they’re seeing on the Ultra Capacity network, and they’re “blown away,” he said. People are seeing speeds up to 300 Mbps on the mid-band spectrum. For the Super Bowl in Tampa, Florida, this weekend, T-Mobile has deployed 80 megahertz of 5G on “hundreds” of mid-band sites, for a mix of 60 and 80 megahertz, he said. Speeds there are north of 500 Mbps on average.

T-Mobile didn’t talk about the C-band auction, per the FCC’s rules, and said it will host an Analyst Day after Auction 107.