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    T-Mobile US (TMUS)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$162.56Last close (Jan 25, 2024)
    Post-Earnings Price$159.92Open (Jan 26, 2024)
    Price Change
    $-2.64(-1.62%)
    • Strong Growth in Underpenetrated Markets: T-Mobile has increased its share of households in smaller markets and rural areas from 13% in 2021 to 17.5% currently, and is on track to achieve its 20% goal by 2025, with potential to exceed this target. This demonstrates significant growth potential beyond their current footprint.
    • Rapid Expansion of Fixed Wireless Access (FWA): In just two years, T-Mobile's Fixed Wireless product has reached nearly 5 million customers, making it one of the largest ISPs in America. The company continues to see strong demand and high customer satisfaction, and believes there is still room to grow both in new customers and additional services, indicating a significant growth driver for the future. ,
    • Commitment to Capital Returns and Margin Expansion: Despite completing merger synergies, T-Mobile expects core adjusted EBITDA growth of nearly 9% year-over-year in 2024, driven by industry-leading service revenue growth and operational efficiencies. The company has authorized up to $16 billion in share buybacks and dividends for 2024, reaffirming its commitment to significant capital returns with no large M&A transactions planned that would disrupt this. ,
    • T-Mobile experienced an increase in postpaid phone churn in Q4 2023, rising by 9 basis points sequentially, which may indicate intensifying competition and potential customer retention challenges.
    • With merger synergies largely realized in 2023, T-Mobile may face difficulties in achieving further cost reductions, potentially impacting margins and EBITDA growth. The company acknowledged that future growth will need to come from operating efficiencies and revenue growth rather than cost-cutting.
    • Declining wholesale revenues due to the loss of customers like Tracfone and DISH could negatively affect T-Mobile's total revenue growth. The company expects a continued year-over-year sequential decline in wholesale revenues but did not provide specific guidance on the magnitude.
    1. Mobile Pricing and ARPU Outlook
      Q: What is the outlook for mobile pricing and ARPU in 2024?
      A: T-Mobile expects 2% growth in ARPA for 2024, driven by customers moving up the rate card and optimizing rate plans and policies. They remain committed to their value leadership but see opportunities to monetize the unprecedented value delivered to customers. Service revenue growth in 2024 is anticipated to exceed the 3.1% achieved in 2023.

    2. Fixed Wireless Growth and Pricing
      Q: How is Fixed Wireless performing, and what's the outlook?
      A: With nearly 5 million customers after two years, Fixed Wireless has strong demand, making T-Mobile one of the largest ISPs in America. They've moved away from promotional pricing to standard pricing, confident in the product's value. They're on track to reach 7–8 million subscribers but see potential to surpass that target.

    3. Capital Allocation and Share Buybacks
      Q: What's influencing the pace of share buybacks and capital allocation?
      A: T-Mobile is committed to delivering up to $16 billion in share buybacks and dividends in 2024. The pace slowed slightly due to the SoftBank share issuance but is expected to continue. They are not pursuing large acquisitions that would impact the buyback plan and have room for investment within their capital return program.

    4. Margin Expansion and EBITDA Growth
      Q: Are you still targeting a core EBITDA margin at or above 50%?
      A: While aiming for margin expansion, T-Mobile focuses on leading and growing free cash flow margin relative to service revenue. The 2024 guidance midpoint reflects a 9% year-over-year growth, which is three times the expectation of peers.

    5. Competition and Churn Trends
      Q: What's driving churn increase, and how is competition affecting you?
      A: Churn increased by 9 basis points sequentially, aligning with seasonal trends. T-Mobile is confident in reducing churn due to offering the best value and network. Competition remains consistent, and T-Mobile continues to win customers with unmatched value.

    6. Enterprise Business Performance
      Q: How is your enterprise business progressing beyond connectivity?
      A: T-Mobile achieved its highest quarter and year in business postpaid phone net additions and gross adds. They've transformed their sales approach, partnering with CIOs and upgrading their product portfolio. New clients include Salesforce and REI, with deepened relationships with Delta, DoorDash, Meta, and UPS.

    7. Impact of ACP Program Changes
      Q: How does the potential end of ACP benefits affect your guidance?
      A: T-Mobile's exposure to ACP is minimal, with substantially none in their reported base. Any potential impacts are fully embedded in their EBITDA guidance.

    8. Wholesale Revenue Outlook
      Q: What is the expected impact of wholesale revenue declines?
      A: A continued year-over-year decline in wholesale revenue is expected due to factors like TracFone and other carriers transitioning off the network. This decline is factored into their guidance.

    9. Upgrade Rates and Free Cash Flow
      Q: Will low upgrade rates affect free cash flow guidance?
      A: Upgrade rates are expected to remain low as customers keep phones longer due to high costs and capable devices. This trend is incorporated into T-Mobile's free cash flow guidance.

    10. SpaceX Partnership Progress
      Q: What are the expectations for the SpaceX direct-to-device service?
      A: Beta testing is expected this year, offering connectivity in unserved areas starting with text messaging and eventually voice and data. This service appeals to anyone in areas not covered by networks.

    11. Network Capacity and 5G Advancements
      Q: Can you update on the 15x capacity goal and 5G impact?
      A: Network capacity is growing, staying ahead by transitioning from LTE to 5G. Their 5G coverage is over twice that of competitors. Network slicing was successfully demonstrated at Formula 1, enhancing high-demand event services.

    12. EPS Guidance Outlook
      Q: Will you provide EPS guidance in the future?
      A: As merger-related costs diminish, T-Mobile plans to focus more on EPS. Significant costs in 2023 and some remaining in 2024 make immediate EPS guidance premature.

    13. Approach to Fixed Wireless Subscriber Target
      Q: How will you manage Fixed Wireless growth nearing your target?
      A: T-Mobile will continue to meet demand appropriately, focusing on mainstream customers and fair pricing. They acknowledge it's early to tell if they'll exceed the 7–8 million subscriber goal but are open to extending beyond it.

    14. Cost Efficiencies and Leverage
      Q: What initiatives aim to improve leverage and efficiency?
      A: Beyond reaching merger synergy targets, T-Mobile is exploring efficiencies through network modernization and leveraging technologies like AI. They see ongoing opportunities to drive efficiencies while prioritizing customers.

    15. Progress in Rural Markets
      Q: How are you performing in smaller markets and rural areas?
      A: T-Mobile has achieved a 17.5% share of households in rural areas, up from 16.5% nine months ago. They're on track to meet the 20% goal by 2025 and are optimistic about exceeding it.

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