Shares of T-Mobile inched upward after the carrier’s third-quarter results largely outpaced analysts’ estimates. But onlookers hoping for news of a blockbuster merger with Sprint will have to wait—for now, at least.
The nation’s third-largest operator reported net income of $550 million during the quarter, up 50% year over year, and revenue of $10.02 billion beat Wall Street predictions of roughly $10.01 billion, Reuters reported. The carrier added 595,000 net postpaid subscribers, falling short of the 646,000 new customers expected by Wells Fargo Securities, but its overall net additions of 1.3 million during the period marked its 18th straight quarter of more than 1 million net additions.
T-Mobile unexpectedly said Sunday that it would release results this morning as speculation of a proposed merger with Sprint reached a deafening pitch. Both T-Mobile and Sprint opted not to hold earnings calls this weeks, throwing more fuel on that fire.
“Customers are continuing to choose T-Mobile over the competition because they get more value for their hard-earned dollar,” T-Mobile said in a press release. “The carriers focus on pushing bigger, fatter, pricier packages of content and services on their customers, while T-Mobile partnered with Netflix to give customers what they want - at no extra cost…. We continue to expand the depth and breadth of our network, and started rolling out 600 MHz spectrum in Q3 well ahead of schedule. The network expansion has enabled our distribution expansion, which is progressing ahead of schedule, and will bring real competition to every corner of the U.S. and sets T-Mobile up for more growth in the future.”
Shares of T-Mobile were up more than 1% late this morning. Here’s a close look at some other key first-quarter metrics from T-Mobile:
Subscribers: Branded postpaid net customer additions came in at 817,000, which T-Mobile said is likely to lead the industry during the third quarter, and churn of 1.23% was down nine basis points from the same period last year. T-Mobile added a net 226,000 branded prepaid customers in the third quarter, down year over year but up significantly from the prior quarter, and prepaid churn was 4.25%, up 34 basis points from the same period a year ago. Importantly, T-Mobile narrowed its guidance range for postpaid net customer additions for the year, raising it to a range of 3.3 million to 3.6 million, up from prior guidance of 3 million to 3.6 million.
Financials: The carrier saw record service revenues of $7.6 billion, up 7% year over year, and its $10 billion in total revenues marked an 8% increase over last year. T-Mobile also posted record net cash provided by operating activities of $2.4 billion, up 36%, and record free cash flow of $921 million was up 59% year over year.
Network and distribution: T-Mobile said it will clear 1.2 million square miles by the end of the year for deployment of the 600 MHz spectrum it won at auction earlier this year, and a second handset supporting those airwaves will come to market in the fourth quarter. It has opened 1,200 new T-Mobile stores and 1,300 new MetroPCS stores, and will launch 500 more retail locations by the rest of the year.
Summary: T-Mobile continued to gain solid—if not dramatic—traction during a relatively uneventful third quarter in the U.S. wireless market. Whether T-Mobile can build on that momentum during the all-important holiday season has yet to be determined, though. And whether it can consummate a tie-up with Sprint remains the most important question in the segment.
“(O)ur bottom line is: (1) Bigger postpaid volume inflections for T-Mobile look like more of a 4Q story, with handset purchasing decisions/switching activity stalled due to later-than-usual iconic device refreshes (success may hinge on how meaningful these refreshes actually are), and (2) fundamentals may continue to be overshadowed by strategic activity, with recent press reports indicating a T-Mobile/Sprint deal announcement may now be delayed until mid-late-November,” Matthew Niknam of Deutsche Bank wrote in a note to investors.