The fourth-largest wireless carrier in the U.S., T-Mobile US, Inc. (TMUS, Financial), posted a decent third quarter, outpacing the expectations of analysts. The growth in subscriber count was a remarkable achievement by the company backed by aggressive ad campaigns and discount schemes to win more customer base. Let’s spend some time reading through the quarter highlights to finally decide if the quarter report card was a promising one or not. So, here’s the overall story.
Revenue on the high
Revenue in the quarter rose 10% to $7.35 billion, in line with the Wall Street forecast of $7.4 billion. Service revenues grew 10.6% in the quarter for the carrier, which is expected to lead the industry in growth.
It was the best quarter ever of branded post-paid net additions that happened this quarter with double-digit percentage growth in service revenue. Around 1.4 million net post-paid additions were witnessed this quarter. The remarkable part in this quarter was that close to 2.3 million customers were added during the quarter.
In the quarter, the Average Billing Per User (ABPU) stood at $61.59, up 4.2% on a year-over-year basis. The wireless carrier continues on its innovative stride as it unleashed the Un-carrier 7.0 – Wi-Fi unleashed that allows Wi-fi calling across all its new smart phones. Also, the iPhone 6 has become T-Mobile’s biggest device launch in its history.
President and CEO John Legere commented during the earnings call, “Despite our competitors’ best efforts, the Un-carrier revolution made huge advances in the third quarter with record net new customers, more proof of the resurgent strength of our brand and the massive momentum behind the Un-carrier consumer movement.”
Network expansion remains the trump card
The company’s network expansion is happening in an accelerated pace, with its 4G LTE network covering over 250 million people, which was set as one of the target goals for the fiscal year. Currently the company is targeting coverage of around 300 million people by the end of 2015 fiscal year.
T-Mobile was also deploying Wideband LTE, while at the same time rolling out 4G LTE on its 700 MHz A-block and 1900 MHz PCS spectrum. By September 30 of this fiscal year, T-Mobile has shown rapid progress on the expansion and integration of MetroPCS which is now in 55 markets with nearly 11,000 points of sale in total, which includes 4,000 in 40 expansion markets. As on the end of the third quarter, 78% of the total MetroPCS customer base is already on the T-Mobile network.
Profit took a beating
Though there was a jump in revenue witnessed in the quarter, profits took a downturn considering the aggressive ad campaigns and advertising costs incurred by the company to keep its stand in the market against the immediate rivals.
The company reported a quarterly loss of $94 million, or $0.12 per share, while analysts were expecting the company to report profit of $0.03 a share. This was something that could worry investors as it comes soon after the second quarter profit of $391 million in the fiscal year.
CEO John Legere, has already hinted that T-Mobile’s target is to surpass Sprint (S, Financial) in its customer count by the end of the year, and the next target set is in overtaking AT&T (T, Financial).
So a drop in margins is likely as the company is interested in achieving better numbers in the near future.
Concluding note
T-Mobile knows how to pull back its profits to be in line with analysts’ expectations in the coming quarters. As the company seems confident of outpacing its rivals to gain a better position in the market, investors should not worry with the drop in bottom-line which might be a one-time affair. So it’s best to stay invested in the stock and keep following the company news to the end of the fiscal year to take a better calculated decision of holding or selling the stock. But things surely look bright for the company, and we can expect better days for T-Mobile in the near future in terms of both top and bottom line growth.
