T-Mobile now expects to add 3.8-4.2M postpaid subs in 2015, hits 300M POPs with LTE coverage

T-Mobile US (NYSE:TMUS) once again increased its expectations for how many branded postpaid customers it expects to add in 2015, now boosting its projection to 3.8 and 4.2 million, up from its previous guidance range of 3.4 to 3.9 million. That figure itself was raised in July and then earlier in April. Through three quarters so far this year, T-Mobile has added around 3.22 million postpaid customers.

As it reported strong third-quarter results T-Mobile also said that its LTE network now covers 300 million POPs, meeting its year-end coverage goal several months early. Getting its network coverage up to parity with Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE: T), which still lead T-Mobile in LTE coverage by around 8 million to 10 million people, has been a key goal for T-Mobile as it seeks to narrow its larger competitors' advantages.

"We've had 10 quarters in a row with over 1 million net new customers, 5 with over a million branded postpaid customers and a total of 2.3 million new customers this quarter alone," T-Mobile CEO John Legere said. "Our momentum is strong and our incredible customer growth is translating directly into solid financial growth which makes it crystal clear that putting customers first is just good business."

T-Mobile reported growth in revenue and a positive turn in earnings, but the results came in below Wall Street analysts' expectations.

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

Subscribers: T-Mobile kept up its blistering pace of subscriber growth in the third quarter, outpacing Verizon and AT&T in terms of total customer growth, especially in postpaid phone customers. T-Mobile likely benefited from a promotion it ran this summer under which two people could get up to 10 GB of LTE data each for $100 per month. Then, each additional line was just $20 more per person, also with 10 GB of LTE data. Under the promotion, the fourth line was free, bringing the total cost to just $120 per month for a family of four. The carrier ended the promotion around Labor Day but brought it back earlier this month and said the original promotion was its "most popular promotion of all time based on the percentage of postpaid customers signing up.""

T-Mobile had 61.2 million total customers at the end of the third quarter and added 2.3 million total customers in the period. T-Mobile has added more than 1 million total net customer additions for the past 10 quarters and more than 2 million in five of the past seven quarters.

The carrier added 1.085 million branded postpaid customers in the quarter, the fifth quarter in a row where it notched more than 1 million postpaid net adds. That figure included 843,000 postpaid phone customer additions, by far the most in the industry (Verizon added 430,000 such customers in the quarter while AT&T lost 545,000, which it said were mostly feature phone customers).

In prepaid, the company added 595,000 total customers in the third quarter, compared to 178,000 in the second quarter and 411,000 in the third quarter of 2014. T-Mobile said this was the best quarterly performance in prepaid net additions since it combined with MetroPCS in the second quarter of 2013. The higher level of branded prepaid net additions in the third quarter was driven by successful promotional activities, particularly at MetroPCS, the company said.

Additionally, T-Mobile said it added 632,000 wholesale in the third quarter, which includes MVNO and M2M customers, compared to 886,000 in the second quarter and 555,000 in the year-ago period.

Financials: T-Mobile posted $7.8 billion in total revenue and $6.3 billion in service revenues, up 7 percent and 11 percent year-over-year, respectively. The company also reported $1.9 billion in adjusted EBITDA, up 42 percent from a year ago and a 30 percent adjusted EBITDA margin, flat from the second quarter and up from 24 percent a year ago.

The company posted net income of $138 million or 15 cents per share in the third quarter, a swing back from a net loss of $94 million a year ago, or a loss of 12 cents per share. However, on average, analysts had expected T-Mobile to post earnings of 30 cents per share and on sales of $8.29 billion, according to Thomson Reuters.

LTE: T-Mobile said its LTE network now covers 300 million POPs, up from 290 million at the end of the second quarter and 250 million at the end of the third quarter of 2014. T-Mobile expects to continue to add to its LTE coverage footprint before the end of 2015.

T-Mobile owns 700 MHz A Block spectrum covering 190 POPs, or approximately 60 percent of the U.S. population and more than 70 percent of the company's existing customer base. Around 98 percent of the population covered by the company's A Block spectrum is free and clear and ready to be deployed or will be ready for deployment in 2015. T-Mobile has deployed the spectrum to nearly 175 million people under the brand name "Extended Range LTE." New market launches in the third quarter of 2015 included the cities of Los Angeles, Atlanta, Sacramento, Cincinnati and Indianapolis.

Churn: Branded postpaid phone churn was 1.46 percent in the third quarter of 2015, down from 1.64 percent a year ago but up from 1.32 percent in the second quarter. The year-over-year improvement reflects ongoing improvements in the company's network, customer service and the overall value of its offerings, T-Mobile said, while the sequential increase in churn was primarily due to seasonal factors.

ARPU: Branded postpaid average billings per user (ABPU), which includes equipment installment plan (EIP) billings and service revenue, was $62.96 in the third quarter, down 0.5 percent from $63.29 in the second quarter of 2015 and up 2.2 percent from $61.59 in the third quarter of 2014. Sequentially, the slight decrease in branded postpaid ABPU was primarily due to lower branded postpaid phone ARPU and a decline in EIP billings and lease revenues on a per user basis. Year-over-year, the increase was primarily due to growth in EIP billings and lease revenues on a per customer basis, offset in part by lower branded postpaid phone ARPU.

For more:
- see this release
- see this presentation (PDF)
- see this CNET article

Special Report:  Wireless in the third quarter of 2015

Related articles:
Report: DT might sell T-Mobile Netherlands to fund T-Mobile US' 600 MHz purchases
T-Mobile brings back promotional $120/month plan for 4 lines, each with 10 GB of data
T-Mobile CFO on 600 MHz incentive auction: 'Dynamics are positive,' carrier could have up to $10B to spend
Analyst: T-Mobile likely gained most subs in Q3 and AT&T fared poorly, based on social media mentions of switching
T-Mobile's Legere: We'll have at least 2.1M net adds in Q3
T-Mobile's Legere open to partnering with Google, Comcast as more firms get into mobile

Correction, Oct. 28, 2015: This article incorrectly said Verizon Wireless added 843,000 postpaid phone customers in the third quarter of 2015. In fact, Verizon added 430,000 such customers

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