It was big news a couple weeks ago when documents leaked on a Reddit thread, indicating that T-Mobile planned to automatically migrate customers on several plans to higher-priced plans. Many news outlets reported it, including Fierce Wireless, and a CNET article indicated that T-Mobile had confirmed the price increases.
But on its Q3 2023 earnings call today, T-Mobile CEO Mike Sievert said the documents that were leaked were related to a test that T-Mobile planned to conduct, rather than a full implementation of a price increase.
T-Mobile CEO said, “We tend to do tests and pilots of things quite a bit to try to figure out what’s the right answer. In this case we had a test cell to try to understand customer interest in and acceptance of migrating off old legacy rate plans to something that’s higher value. And then it leaked, and it leaked as if it was a broad national thing, and it kind of wasn’t.”
Then Sievert said, “Now, I don’t think we have to do that test because we did get plenty of feedback, and I think we’ve learned that particular test cell isn’t something that our customers are going to love.”
Getting to the meat of today’s earnings report, T-Mobile reported postpaid phone net customer additions of 850,000, which it said was “relatively flat year-over-year, reflecting increased gross additions and lower churn, offset by increased deactivations from a customer base that grew 4%.”
In terms of the deactivations, T-Mobile CFO Peter Osvaldik said those were “lower ARPU postpaid other data devices in the education sector."
Postpaid phone churn of 0.87% improved 1 basis point year-over-year.
The company raised its guidance for total postpaid net customer additions to be between 5.7 million to 5.9 million. Included in this guidance is the expectation of approximately 3 million postpaid phone net additions for the full year.
Total service revenues of $15.9 billion increased 4% year-over-year, and postpaid service revenues of $12.3 billion increased 6% year-over-year.
Its postpaid average revenue per account (ARPA) increased to $139.83 vs $137.49 year over year.
The company also reported adjusted free cash flow of $4 billion in the quarter, representing growth of 94% year-over-year. And it raised its full-year 2023 guidance for adjusted free cash flow to be between $13.4 billion to $13.6 billion, an increase from prior guidance of $13.2 billion to $13.6 billion.
During Q3, T-Mobile announced layoffs of 5,000 employees. On today’s call executives said that as T-Mobile got through the balance of the integration with Sprint, it had to make some changes. There are no more plans to do additional layoffs in 2024.
Just yesterday, T-Mobile said its 5G Ultra Capacity network, which uses mid-band spectrum, now covers more than 300 million people in the U.S. And it’s achieved this milestone two months ahead of schedule.
T-Mobile is also conducting pilots related to rolling out fiber networks. Today, Sievert said, “we are conducting all kinds of experiments in the space, including observing our national performance in 5G Home broadband. To the extent we make investments or partnerships in the area our view is it should be capital light, generally off-balance sheet.”
Currently, T-Mobile is working with a couple of fiber deployers, including Intrepid Fiber Networks. Intrepid is deploying two open access networks in Colorado: in the cities of Northglenn and Pueblo, and T-Mobile will be the first anchor tenant on those fiber networks.
The company reported that it now serves over 4.2 million customers with its fixed wireless access (FWA) product.
T-Mobile is marketing FWA to about 50 million homes. And the company added about 500,000 during the quarter.
Sievert indicated that T-Mobile is still looking at technologies that might allow it to deploy more FWA. He said, “We remain open-minded to whether there are techniques that would allow us to deploy capital specifically for 5G broadband. But so far, we haven’t drawn any conclusions that that’s a scalable opportunity for us.”
He again explained how T-Mobile only allows new 5G Home customers in places where it has extra capacity on its wireless network. “On every sector of every tower we have an assessment of capacity not just now but out into the future assuming ongoing wireless smartphone share-taking and ongoing rapid increase in wireless consumption per smartphone.” Once T-Mobile plots all of that out, it identifies sectors of towers where no normal amount of share-taking or wireless smartphone consumption will use up the capacity anytime soon. And in those places it approves applicants for its home broadband service.