T-Mobile Q4 Reports $101 Million Earnings

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Feb 20, 2015

T-Mobile US, Inc. (TMUS, Financial), the telecommunication company reported net income of $101 million in its fourth quarter. This profit is a huge boon to company as the company suffered losses of $20 million in the same quarter last year.

STATISTICS COMPARED TO LAST YEAR

Earnings per share last year was reported at a loss of $0.03 previous year. This year the earnings per share in the fourth quarter was $0.12. Total revenue increased to $8.154 billion as compared to last year's $6.827 billion. According to a survey by Thomson Reuters, the results topped the expectation of analysts of revenue $7.89 billion and EPS of 5 cents a share. T-Mobile US was active at $31 in premarket trading Thursday. T-mobile expects their adjusted earnings before interest, taxes, depreciation and amortization to be within $6.8 to $7.2 billion in 2015. The cash capital expenditure is said to be between $4.4 and $4.7 billion for 2015.

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Retrospection

T-Mobile was set up as VoiceStream Wireless PCS in 1994. The company was a subsidiary of Western Wireless Corporation. It was renamed as T-Mobile USA in July 2002. T-Mobile merged with MetroPCS and the combined company, T-Mobile US, Inc. started trading as a public company on the NYSE under the symbol TMUS. A few of T-Mobile's products include the "Un-carrier", Simple Choice and JUMP! Data Stash, Phones and SIMs, banking cards, etc.

John Legree, the company's CEO said that 2014 experienced the best growth in the company history. He said that their Un-carrier moves helped them to achieve a competitive advantage. Although they haven't pinned their hopes too high, he said that the future looks bright in 2015. T-mobile is known for adding new customers every quarter. This was the seven consecutive quarters where the company got more than a million new customers. Though the larger question was if the company could generate profits, and seemingly it did very well. Critics have said that T-Mobile's aggressive approach to win new customers under the Un-carrier is not financially sustainable as of now. The challenge will be in 2015 where this carrier will start to deliver earnings at a consistent rate.

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Last quarter itself the company added 2.1 million new consumers. Around 1.3 million new post-paid subscribers are added. These post-paid subscribers tend to stay with the carrier for a longer period of time. This movement will continue in 2015, but with a slow growth rate. Around 2.2 to 3.2 million consumers are expected to be added in 2015.

PROMOTIONAL PROGRAMS

The company expects such a high rate of new consumers due to their promotional programs. December 2014 saw T-Mobile introduce Data Stash, a data rollover program. According to this program the consumers can keep their unused data. This program is expected to have an impact, non-cash, between $100 and $150 million. This charge is to account for the 10 gigabyte distribution of data to the customers who sign up. The Simple Choice Plan also contributed to the profits in a significant manner. Competitors felt threatened and introduced their own promotional events. AT&T Inc. (T) introduced its own rollover program in January. Sprint Corporation (S, Financial) will continue to promote the scheme "Cut your rate plan in half" throughout 2015. This stiff competition did have a slight impact on T-mobile. The customer rate ticked up 10 basis points to 1.7% last year.

Takeaway

The main focus of T-Mobile is to widen their network coverage. AT&T and Verizon boast of high network coverage and T-Mobile is not far behind. The company is targeting 300 million people this year for 4G LTE network as compared to their existing customer base of 265 million people. T-Mobile currently ranks at the fourth position in its overall performance-just behind arch-rival Sprint.