T-Mobile US continues strong growth, this time with improved financials

T-Mobile US’ impressive run of customer growth over the past year took a step back during the second quarter, though the nation’s No. 4 operator still managed to post strong growth and – more importantly – improved financial performance.
During the second quarter, T-Mobile US added just short of 1.5 million connections to its network, which topped the posted results from its larger rivals at Verizon Wireless and AT&T Mobility. (As for Sprint, the less said the better.) T-Mobile US’ Q2 growth also out-paced the 1.1 million net additions posted during the second quarter of last year, but fell short sequentially of the nearly 2.4 million customers added during the first quarter of this year.
T-Mobile US’ latest growth numbers were led by its direct postpaid services, which added 908,000 net customers during the quarter. The carrier’s branded prepaid offerings contributed 102,000 net customer additions, while its machine-to-machine operations counted 225,000 net additions and its wholesale service tagged on another 235,000 net customer additions. Overall, T-Mobile US ended the first half of the year with more than 50.5 million connections on its network, just four million shy of No. 3 rival Sprint. For the full year, T-Mobile US increased its forecast for postpaid customer growth, stating that it now expects to add up to 3.5 million total customers in 2014. So far the carrier has added 2.2 million postpaid customers, which would indicate some slowdown through the second half of the year.
Direct postpaid customer churn remained flat both sequentially and year-over-year at 1.5%, while prepaid churn was down year-over-year from 5.4% to 4.5%, but up from the 4.3% posted during the first quarter.
Financially, branded postpaid customers spent an average of $49.32 per month for service, which was down a substantial $4.72 year-over-year. However, when factoring in the growth of the carrier’s Simple Choice rate plans that are tied to customers paying a monthly fee for an unsubsidized device, customer spending per month had actually increased $1.07 year-over-year to $59.79. Prepaid ARPU increased $2.38 year-over-year to $37.16.
The increased monthly spending on top of the larger customer base resulted in a 15% increase in total revenues to nearly $7.2 billion for the second quarter. Net income also turned around, improving from a loss of $16 million last year to a return of $391 million this year.
For the investment community, T-Mobile US also showed sequential growth in adjusted earnings before interest, taxes, depreciation and amortization to $1.45 billion, while adjusted EBITDA margins increased from 20% during the first quarter to 26% during Q2.
Capital expenditures remained relatively flat sequentially at $940 million during the quarter, though it was down from the $1.05 billion spent during the second quarter last year. T-Mobile US said it ended the first half of the year with its LTE network covering 233 million potential customers, which was short of the more than 300 million claimed by Verizon Wireless, 290 million claimed by AT&T Mobility and 254 million claimed by Sprint. However, T-Mobile US plans to continue expansion later this year tapping into the 700 MHz spectrum assets acquired from Verizon Wireless.
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