T-Mobile expects to add more than 3M postpaid subs in 2015

T-Mobile US (NYSE:TMUS) easily outpaced Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE: T) in postpaid adds during the first quarter. The company also raised its guidance for postpaid subscriber additions for 2015 from the previously guidance of 2.2 million to 3.2 million to between 3 million and 3.5 million.

During the first quarter T-Mobile added 1.8 million total customers, its eighth consecutive quarter of more than 1 million, and also added 1.1 million branded postpaid customers, its third consecutive quarter for adding more than 1 million postpaid adds.

While the carrier's introduction of its "Data Stash" rollover data program distorted its financials in the first quarter, T-Mobile CFO Braxton Carter said that over the course of the year it will become a "tailwind" instead of a "headwind." For example, T-Mobile said the non-cash revenue deferral for Data Stash reduced its adjusted EBITDA by $112 million in the first quarter. T-Mobile is giving its Simple Choice customers 10 GB of free data to use through 2015 before they start using their plan's data, which is cutting into T-Mobile's revenue. The company expects that effect to reverse itself as the year goes on.  

T-Mobile executives said during the carrier's quarterly earnings conference call that with 16.5 percent market share among the Tier 1 carriers, the company still has quite a bit of room to grow. T-Mobile CEO John Legere said the company is leading the industry in terms of its share of gross additions and in porting ratios, and that its churn is declining. "I think those things bode very well for us," he said.

T-Mobile COO Mike Sievert said that consumer awareness of some of T-Mobile's "most innovative moves" like zero-rating streaming music services and paying off Early Termination Fees range anywhere from 10 to 29 percent, so the company can still gain share by raising awareness of these offers.

Sievert added that the company's results show that "it's not rhetoric. People are coming to this brand, they're kicking the tires and they're liking what they see."

Both Legere and Sievert also touched on T-Mobile's partnership with Google (NASDAQ: GOOG) for its "Project Fi" MVNO; Google is also partnering with Sprint (NYSE: S) on the MVNO.  Sievert declined to discuss the terms of the deal, but said T-Mobile expects to make money from it and that T-Mobile relishes the opportunity to work with Google. He also said that if some elements of Project Fi prove popular they could eventually be adopted by T-Mobile.  A key element of Project Fi is to credit customers at the end of each month for unused data. "This is about disruption and about changing the norms and standard in the industry," Sievert said.

"As content and entertainment and social are moving to the Internet, and the Internet is moving mobile, these industries, the adjacent industries, are in the same game that we're in," Legere said.  "I think you need to think about the cable industry and players like us as not competitors, but potential partners and alternatives for each other in the future."

Here is a breakdown of T-Mobile's first-quarter results:

Subscribers: T-Mobile ended the first quarter with 56.8 million total customers. The company added 991,000 postpaid phone customers and 134,000 postpaid mobile broadband customers. T-Mobile added 73,000 branded prepaid customers quarter. Overall, T-Mobile added 620,000 wholesale customers in the period, including 479,000 MVNO customers and 141,000 M2M connections.

Financials:  T-Mobile said total revenues for the quarter were $7.8 billion, up 13.1 percent from a year ago, while service revenues were $5.8 billion, up 9 percent year-over-year. The company reported EBITDA of $1.4 billion, up 27.6 percent year-over-year, and an adjusted EBITDA margin of 24 percent, compared to 30 percent in the fourth quarter of 2014 and 20 percent in the first quarter of 2014. T-Mobile posted a net loss of $63 million for the quarter, narrower than a loss of $151 million a year ago. Carter said investors should expect positive earnings per share for the rest of the year.

LTE: T-Mobile said it now covers 275 million POPs with LTE and remains on track to cover 280 million POPs with LTE by mid-year and 300 million POPs by year-end. The company continues to deploy its 700 MHz A Block spectrum, with major market launches in Dallas; Detroit; Houston; Philadelphia; Tampa, Fla; and San Antonio, Texas, so far in 2015, bringing the total to 55 markets. T-Mobile CTO Neville Ray said the company does not need to acquire any more 700 MHz spectrum to reach its goal of covering 300 million POPs with LTE by the end of the year.

MetroPCS: T-Mobile said that less than 500,000 customers remain on the MetroPCS CDMA network and around 80 percent MetroPCS' spectrum had been refarmed and integrated into the T-Mobile network as of the end of the first quarter. In the first quarter T-Mobile decommissioned the CDMA portion of the MetroPCS network in Atlanta and the Detroit metro area, bringing the overall total market shutdowns to eight so far, with only three major markets left. T-Mobile still expects to shut down the entire CDMA network in the second half of 2015.

Churn: Branded postpaid phone churn was 1.3 percent in the first quarter, down from 1.47 percent year-over-year and down from 1.73 percent in the fourth quarter.

ARPU: Branded postpaid Average Billings Per User (ABPU), which includes device installment billings and service revenue, was $60.94 in the first quarter, down 1.4 percent sequentially and up 2.4 percent year-over-year. Excluding the impact of Data Stash, branded postpaid ABPU in the first quarter of 2015 increased 0.6 percent sequentially and 4.5 percent year-over-year.

For more:
- see this release
- see this presentation (PDF)
- see this WSJ article (sub. req.)
- see this PhoneScoop article

Special Report: Wireless in the first quarter of 2015

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