T-Mobile posts 'genuinely good' 933K postpaid net adds in Q4

T-Mobile CEO John Legere

Shares of T-Mobile inched upward after the carrier said it grew both its market share and the bottom line in the fourth quarter.

The nation’s third-largest mobile network operator posted 2.1 million total net customer additions in the fourth quarter, marking its 15th straight quarter of more than 1 million total net customer adds and bringing its total user base to 71.5 million. Branded postpaid phone churn was 1.28%, down four basis points sequentially and down 18 basis points year over year.

Meanwhile, service revenues came in at $7.2 billion, up 11% year over year but just shy of Wells Fargo Securities’ estimates of $7.28 billion. Net income of $390 million for the quarter was up 23% year over year.

The subscriber gains were particularly noteworthy because they came amid pitched competition among carriers during the all-important holiday quarter. Shares of T-Mobile rose 1.8% in premarket trading before settling up 0.6% by midday.

“We’re the only wireless provider growing both our prepaid and postpaid businesses for the 14th quarter in a row,” CEO John Legere said on an earnings call. “Our financial results were fantastic. We remain the only growth company in the industry. … That thing they call the competitive environment? That’s us.”

Here’s a close look at some key fourth-quarter metrics from T-Mobile:

Subscribers: The operator reported 1.2 million branded postpaid net additions, 933,000 of which were phone net additions. And T-Mobile once again thrived in prepaid, claiming 541,000 branded prepaid net additions due primarily to its MetroPCS brand. Branded prepaid churn was 3.94% for the quarter, down 26 basis points year over year, and prepaid churn for the year was 3.88%, a company record.

Financials: While service revenue fell shy of estimates, equipment revenue came in at $2.74 billion, beating Wells Fargo’s estimate of $2.39 billion. Postpaid phone ARPU was $48.37, beating Wells Fargo’s estimate by a dime, and was up 0.7% year over year.

The network: By the end of last year, roughly 70% of T-Mobile’s spectrum was being used for LTE, up from 52% at the end of 2015. And executives continued to point to a study released by Open Signal last week that found T-Mobile and Verizon operate the fastest LTE networks in the U.S.

Outlook: T-Mobile expects to add between 2.4 million and 3.4 million branded postpaid net additions this year, reiterating previously issued guidance, and the company is targeting between $10.4 billion and $10.8 billion in adjusted EBITDA. Free cash flow is expected to see a compound annual growth rate of between 45% and 48%.

Summary: “What we learned was about what we expected, which is to say that we all thought T-Mobile was by far the strongest operating story in wireless, and today’s results were mere confirmation,” MoffettNathanson Research wrote in a note to subscribers. “That’s more than just a one-eyed-man-in-the-kingdom-of-the-blind argument, by the way; T-Mobile’s results are genuinely good. It’s just that that’s exactly what everyone already expected.”