T-Mobile US Earnings Soar on Strong Subscriber Additions

By MarketsFool.com

T-Mobile US (NASDAQ: TMUS) reported fourth-quarter results on Feb. 14. The No. 3 U.S. wireless carrier is enjoying surging sales and profits as it continues to take share from its rivals.

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T-Mobile results: The raw numbers

Data source: T-Mobile Q4 2016 financial results.

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Image source: T-Mobile US.

What happened with T-Mobile this quarter?

T-Mobile added 2.1 million total net customers in the fourth quarter -- and 8.2 million for the full year -- bringing T-Mobile's total customer count to 71.5 million at the end of 2016.

"That's three years in a row that we've added more than 8 million customers and taken all of the postpaid phone growth in the industry," said CEO John Legere in a press release.

T-Mobile added 1.2 postpaid subscribers -- who pay traditional monthly bills -- during the quarter, including 933,000 net postpaid phone customers. That brought the company's full-year postpaid phone net additions to 3.3 million.

By comparison, Sprint (NYSE: S) added 368,000 postpaid phone subscribers in Q4, while Verizon Communications (NYSE: VZ) added 167,000, and AT&T (NYSE: T) lost 67,000.

T-Mobile's branded prepaid net adds also led the industry at 541,000, driven by solid growth in its MetroPCS business.

Moreover, T-Mobile continues to display signs of improving customer loyalty, with branded postpaid phone churn declining 18 basis points, to 1.28%, compared to the year-ago period. Postpaid phone ARPU (average revenue per user) likewise improved, rising 0.7% year over year to $48.37.

This powerful combination of strong subscriber growth, greater customer retention, and rising ARPU helped to drive fourth-quarter revenue higher by 23% to $10.2 billion.

Additionally, EBITDA (earnings before interest, taxes, depreciation, and amortization) -- adjusted to exclude stock-based compensation as well as gains related to the sale of spectrum licenses and other non-recurring items -- increased 19% to $2.5 billion. And adjusted net income surged 84% to $390 million.

T-Mobile also strengthened its cash generation, with full-year operating cash flow increasing 13% to $6.1 billion, and free cash flow more than doubling to $1.4 billion.

"These results are proof that doing right by customers is also good for shareholders. Not only are customers flocking to T-Mobile, but we're also producing rock-solid financial results," said Legere.

Looking forward

These solid results prompted T-Mobile to issue a largely positive outlook for 2017, including:

  • Branded postpaid net additions of 2.4 million to 3.4 million
  • Adjusted EBITDA of $10.4 billion to $10.8 billion
  • Capital expenditures of $4.8 billion to $5.1 billion

T-Mobile also said it expects its operating cash flow to grow between 15% and 18% annually over the next three years, while free cash flow is projected to rise between 45% and 48% during that same time. "I've never been more confident about the future at T-Mobile as we look into 2017," said Legere during a conference call with analysts.

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.