T-Mobile US, Inc. is a leading provider of mobile communications services in the United States, Puerto Rico, and the U.S. Virgin Islands, offering voice, messaging, and data services primarily through its 4G LTE and 5G networks . The company operates under the flagship brands T-Mobile and Metro by T-Mobile and provides a wide selection of wireless devices, including smartphones, tablets, wearables, and home broadband routers, along with accessories and equipment installment plans (EIP) for financing device purchases . T-Mobile's most popular service plan is Go5G Plus, which offers unlimited talk, text, and data, 5G access, and other features . In addition to mobile services, T-Mobile provides High Speed Internet through a fixed wireless product that utilizes their 5G network, offering an alternative to traditional landline internet services .
- Postpaid Services - Offers mobile communication services to customers who are billed after usage, contributing significantly to service revenues .
- Prepaid Services - Provides mobile services to customers who pay in advance, catering to those who prefer not to commit to long-term contracts .
- Wholesale Wireless Services - Allows partners to sell services using T-Mobile's network, expanding the company's reach through third-party vendors .
- High Speed Internet - Delivers internet services through a fixed wireless product utilizing the 5G network, providing an alternative to traditional landline internet .
- Wireless Devices and Accessories - Sells a variety of devices such as smartphones, tablets, wearables, and home broadband routers, along with related accessories .
- Specialized Service Plans - Offers tailored plans for specific customer segments, including Military and Veterans, First Responders, and customers aged 55 and over .
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What went well
- Strong Growth in Smaller Markets and Rural Areas: T-Mobile achieved its highest win share ever in Q2 and surpassed it in Q3, driving switching and winning decisions in smaller markets and rural areas. The company is #1 in Net Promoter Score, which is 20% higher than the next highest competitor, building customer advocacy and loyalty.
- Record Performance in Business Segment: T-Mobile's business group beat its benchmark competitor in postpaid phone net adds, postpaid net adds, and invoice churn. The enterprise segment had its best activations on record, with considerable growth across all solutions and new customer wins like American Airlines and New York Life Insurance. This marks the ninth consecutive quarter of positive trends in all segments against competitors.
- Rapid Growth in Broadband Customers: T-Mobile delivered industry-leading net adds in broadband, reaching a major milestone of 6 million customers in just 3 years, which is halfway to its long-term target of 12 million customers by 2028. The growth is fueled by its leading 5G network and high customer satisfaction, with average speeds matching cable providers.
What went wrong
- Pending regulatory approvals for acquisitions (Lumos, Metronet, U.S. Cellular) could delay strategic plans, impacting growth opportunities.
- Challenges to T-Mobile's plan to use PCS spectrum for direct-to-device service with Starlink may pose headwinds, potentially affecting future service offerings.
- Uncertainty around future spectrum costs and investments for 6G could lead to higher expenses, impacting long-term profitability.
Q&A Summary
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Share Buyback Strategy
Q: What's the plan for share buybacks going forward?
A: T-Mobile reevaluated its buyback strategy after the unexpected rise in share price. They are now executing more consistently in the marketplace and have been active in buybacks since the strategic change, while being thoughtful about various factors. -
EBITDA Guidance Increase
Q: What's driving the EBITDA guidance increase for the year?
A: The guidance increase is due to higher net adds, with raised forecasts for total postpaid and postpaid phone adds. A noncash spectrum swap gain of about $137 million also contributed, offset by a higher ACP decline and hurricane costs, resulting in a net increase in guidance. -
Future 6G Costs
Q: How do you view potential 6G cycle costs and impact on growth?
A: While it's premature, T-Mobile is optimistic about long-term trends. The next cycle may be more efficient due to advancements like AI RAN, potentially reducing deployment costs compared to prior cycles. They aim to drive future technologies that benefit T-Mobile customers. -
Pricing Strategy Balance
Q: With industry price increases sticking, will you focus more on pricing over volume growth?
A: T-Mobile emphasizes value, leading to leading service revenue growth. While they keep up with industry trends, they're cautious about risking their value proposition. Any future changes will align with their commitment to superior value for customers. -
Spectrum Strategy Updates
Q: What's the update on spectrum trading and plans for additional spectrum?
A: T-Mobile values spectrum for short, mid, and long term. They traded the 3.45 GHz spectrum as it's not part of their current plan and are satisfied with the outcome. The 800 MHz auction concluded without a qualifying bid, providing optionality to deploy or monetize it. -
U.S. Cellular Deal Progress
Q: How is the U.S. Cellular deal progressing?
A: The process is going well, with expected closure in 2025. Regulatory reviews are underway, and T-Mobile believes the deal will benefit consumers by leading to lower pricing and better coverage for all customers. -
Postpaid Net Add Guidance
Q: Is the [3 million] postpaid phone net add target conservative?
A: The approximate [3 million] target accounts for significant activity in the last months of Q4. While T-Mobile aims to outperform, they're cautious as the biggest months are ahead. Current quarter-to-date trends are strong and on plan. -
Consumer Wireless Outlook
Q: Are you concerned about a deceleration in consumer wireless gross adds?
A: T-Mobile doesn't see notable indicators of changes in consumer behavior or macroeconomic concerns. The essential nature of their service makes them less sensitive to such trends, and customers continue to pay at traditional norms. -
Handset Upgrade Cycle
Q: How are you preparing for a potential AI-driven handset upgrade cycle?
A: Current upgrade rates are low as customers' needs are met with existing devices. If there's a robust upgrade cycle, T-Mobile is well-positioned to win, having consistently won when there's increased switching due to new devices. They expect to benefit from future cycles. -
Fixed Wireless Trends
Q: With consistent quarterly net adds, is your [12 million] aspiration achievable?
A: T-Mobile is confident in their fixed wireless product's potential. While current run rates require gross adds to grow to meet the [12 million] aspiration by 2028, they see strong customer satisfaction and competitive speeds matching cable providers. -
ARPU Growth Drivers
Q: Is the ARPU upside due to mix or price rise?
A: ARPU growth is driven by expanding customer relationships, including 5G home broadband and connected devices. Rate plan optimization was a minor factor; the 3% ARPA increase is mainly due to core customer expansion. -
Wholesale Revenue Outlook
Q: What's the outlook for wholesale revenue given ACP and Mint Mobile impacts?
A: T-Mobile expects wholesale and other service revenue to reach a trough in 2025, with underlying growth in wholesale partnerships. The ACP decline is expected towards the higher end of the $350 million to $450 million range previously given, and the transition of TracFone to Verizon continues. -
Network Upgrade Plans
Q: Can you comment on wireless network upgrade plans for next year?
A: T-Mobile uses a customer-driven coverage approach, utilizing AI to prioritize upgrades based on customer experience and business data. This allows efficient capital allocation, focusing on areas where customers value their build most, rather than broad priorities. -
SMRA Market Growth
Q: Update on penetration in SMRA markets?
A: T-Mobile is pleased with growth in smaller markets and rural areas, representing 40% of the market. Q3 exceeded Q2, which was their highest win share quarter ever, demonstrating strong customer advocacy and switching gains. -
Business Vertical Expansion
Q: Update on growth within the business vertical?
A: T-Mobile has beaten competitors in postpaid net adds and churn, seeing profitable growth across all segments. Significant customer wins include American Airlines, Lowe's, and several government and education entities, contributing to rising customer lifetime values. -
Digitalization Upside
Q: Can you quantify potential cost improvements from digitalization efforts?
A: T-Mobile outlined an ambitious plan at Capital Markets Day, signaling a 2027 core adjusted EBITDA about $10 billion above 2023 levels. Much of this is driven by revenue growth from digitalization, operational improvements, and preventing customer problems. Full achievement of KPIs may provide upside beyond guidance. -
DT Ownership Increase
Q: What's your understanding of DT's plans to increase T-Mobile ownership?
A: Deutsche Telekom mentioned wanting to increase their stake, but timing and method are up to them. Governance and board structure remain consistent, and they've been supportive of T-Mobile's strategy. -
AT&T Fiber Wholesale
Q: Would leveraging AT&T's wholesale fiber network make sense for you?
A: While the future is hard to predict, T-Mobile is open to all future constructs. They're excited about their own fiber plans and intend to compete vigorously, aiming to be first to fiber in their markets. -
Direct-to-Device Challenges
Q: Do challenges to your PCS spectrum use with Starlink pose a headwind?
A: T-Mobile doesn't see barriers to progress with their direct-to-device service. They're moving forward with beta testing, having successfully tested during hurricanes, and believe this is fundamentally good, proceeding despite FCC processes. -
ARPU Strength
Q: Postpaid phone ARPU is up more than expected; can you explain the strength?
A: T-Mobile now expects about 75 basis points year-over-year ARPU increase, slightly higher than the previously expected 0.5%. However, ARPU is mix-driven, so they focus on ARPA, which shows continued strength, leading to an increased guidance of 3% year-over-year growth.
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Given your recent spectrum transactions involving the 3.45 GHz and 2.5 GHz bands, can you elaborate on how these moves align with your long-term spectrum strategy and network deployment plans, particularly regarding urban versus rural coverage priorities?
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With Deutsche Telekom expressing intentions to increase its ownership stake in T-Mobile, how might this impact your capital allocation strategies, especially concerning share buybacks and investments in growth opportunities, and what should minority shareholders expect from this development?
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Your guidance for postpaid phone net additions implies a potential deceleration in the fourth quarter; is this due to increasing competitive pressures or other factors, and how confident are you in achieving or exceeding this target?
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Can you provide specific quantification of the expected cost savings or margin improvements from your digitalization initiatives, and how will you ensure these efforts translate into tangible financial benefits over the next few years?
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Regarding the U.S. Cellular acquisition, can you detail the anticipated regulatory challenges and how you plan to integrate their assets to deliver both lower prices and better network experiences without disrupting your existing operations?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Total Postpaid Customer Net Additions: Expected to be between 5.6 million and 5.8 million, up 150,000 at the midpoint relative to the prior guidance .
- Postpaid Phone Customer Net Additions: Expected to be approximately 3 million for the full year .
- Postpaid ARPA (Average Revenue Per Account): Expected to be up around 3% year-over-year .
- Core Adjusted EBITDA: Expected to be between $31.6 billion and $31.8 billion for the full year, up $50 million at the midpoint .
- Cash CapEx: Expected to be between $8.8 billion and $9 billion, unchanged at the midpoint .
- Adjusted Free Cash Flow: Expected to be in the range of $16.7 billion to $17 billion, up $50 million at the midpoint .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Total Postpaid Customer Net Additions: Expected to be between 5.4 million and 5.7 million, up 150,000 at the midpoint .
- Postpaid Phone Net Customer Additions: Expected to be approximately half of the total postpaid additions .
- Postpaid ARPA (Average Revenue Per Account): Expected to be up to 3% higher year-over-year .
- Core Adjusted EBITDA: Expected to be between $31.5 billion and $31.8 billion, unchanged at the midpoint .
- Cash CapEx: Expected to be between $8.7 billion and $9.1 billion .
- Adjusted Free Cash Flow: Expected to be in the range of $16.6 billion to $17 billion, up $150 million at the midpoint .
- Impact of ACP (Affordable Connectivity Program): Expected to be in the range of $350 million to $450 million .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Total Postpaid Net Customer Additions: Expected to be between 5.2 million and 5.6 million, up $150,000 at the midpoint .
- Full Year Postpaid ARPA (Average Revenue Per Account): Expected to grow up to 3% in 2024 .
- Core Adjusted EBITDA: Expected to be between $31.4 billion and $31.9 billion, up 9% year-over-year at the midpoint .
- Cash CapEx: Expected to be between $8.6 billion and $9.4 billion .
- Adjusted Free Cash Flow: Expected to be in the range of $16.4 billion to $16.9 billion, up 23% over last year at the midpoint .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Total Postpaid Net Customer Additions: Expected to be between 5 million and 5.5 million .
- Core Adjusted EBITDA: Expected to be between $31.3 billion and $31.9 billion, representing nearly a 9% year-over-year increase at the midpoint .
- Cash CapEx: Expected to be between $8.6 billion and $9.4 billion .
- Free Cash Flow: Expected to be in the range of $16.3 billion to $16.9 billion, up approximately 22% over the previous year at the midpoint .
- Postpaid ARPA (Average Revenue Per Account): Expected to increase by approximately 2% in 2024 .
Competitors mentioned in the company's latest 10K filing.
- AT&T Inc. - Traditional Mobile Network Operator (MNO) and competitor in wireless communications services .
- Verizon Communications, Inc. - Traditional MNO and competitor in wireless communications services .
- DISH Network Corporation - Competitor as it continues to grow its network .
- Comcast Corporation - Smaller and regional provider offering wireless services under MVNO agreements .
- Charter Communications, Inc. - Smaller and regional provider offering wireless services under MVNO agreements .
- Cox Communications, Inc. - Smaller and regional provider offering wireless services under MVNO agreements .
- Altice USA, Inc. - Smaller and regional provider offering wireless services under MVNO agreements .
Recent developments and announcements about TMUS.
Financial Reporting
Auditor Changes
T-Mobile US, Inc. Auditor Change
On April 13, 2022, T-Mobile US, Inc. announced a change in its independent registered public accounting firm. The company dismissed PricewaterhouseCoopers LLP (PwC) and engaged Deloitte & Touche LLP (Deloitte) as its new auditor for the fiscal year ending December 31, 2022. This change aligns T-Mobile's audit firm with that of Deutsche Telekom AG, following European Union regulations on auditor rotation. The change will be effective immediately after T-Mobile files its Quarterly Report on Form 10-Q for the period ended March 31, 2022, with the SEC .