T-Mobile US today reported a 4% year-over-year YoY) increase in service revenues, to about $16.4 billion, for the recent second quarter. Total sales increased 3%, to almost $19.8 billion. The un-carrier’s profitability metrics were even better. Adjusted earnings (before interest, tax, depreciation and amortization) rose 9%, to nearly $8.1 billion. T-Mobile’s adjusted free cash flow rocketed 54%, to about $4.4 billion. There were also several positive changes to full-year guidance, which included raising the outlook for free cash flow by $150 million (at the midpoint), to $16.8 billion.
“It was another industry-leading quarter for T-Mobile as our continued focus on delivering customers more value and a superior network experience enabled us to outperform our peers in the marketplace and translated into outsized financial growth,” said Mike Sievert, CEO of T-Mobile. “Our formula is continuing to work and we’ve got a lot of room to run including pursuing new growth opportunities that bring the Un-carrier experience to more customers and new markets. This incredible momentum makes us even more excited for what’s next for T-Mobile, and our confidence is reflected in our raised guidance for the full year ahead.”
Peter Osvaldik, T-Mobile’s chief financial officer, boasted “unmatched capital efficiency” on today’s call with analysts. “While our longer-term expectations continue to be in the $9 to $10 billion range annually, as we discussed before, 2024 is a bit lower given certain capital-efficient network activities such as spectrum re-farming and deploying additional 2.5GHz licenses from Auction 108, benefiting from the significant 5G radio deployments during our merger integration,” he said, referring to a previous frequency sale and the $26 billion merger with Sprint in 2020. Site upgrades and build activity is planned in the fourth quarter, he said.
Other T-Mo Highlights:
Industry-Leading Customer Growth Fueled by Best Network and Best Value Combination (1)
Postpaid net account additions of 301 thousand, best in industry
Postpaid net customer additions of 1.3 million, best in industry, crossed 100 million postpaid customers milestone
Postpaid phone net customer additions of 777 thousand, best in industry, highest Q2 in company history, and postpaid phone churn of 0.80%
High Speed Internet net customer additions of 406 thousand, best in industry, highest share of industry net additions ever
Translating Industry-Leading Customer Growth Into Industry-Leading Financial Performance
Service revenues of $16.4 billion grew 4% year-over-year, best in industry growth
Postpaid service revenues of $12.9 billion grew 7% year-over-year, best in industry growth
Net income of $2.9 billion grew 32% year-over-year, best in industry growth
Diluted earnings per share (“EPS”) of $2.49 grew 34% year-over-year, best in industry growth
Core Adjusted EBITDA (2) of $8.0 billion grew 9% year-over-year, best in industry growth
Net cash provided by operating activities of $5.5 billion, record high and grew 27% year-over-year
Adjusted Free Cash Flow (2) of $4.4 billion, record high and grew 54% year-over-year
Returned $3.0 billion to stockholders in Q2 2024, including repurchases of $2.3 billion of common stock and a quarterly dividend payment of $759 million
Overall Network Leader with Largest, Fastest and Most Advanced 5G Network:
T-Mobile’s network breadth, depth and technology leadership is expected to keep the company years ahead of the competition with total 5G and Ultra Capacity 5G coverage area that continues to far exceed that of the next closest competitor. The company’s unique multi-layer approach to 5G, with dedicated standalone 5G deployed nationwide across 600MHz, 1.9GHz, and 2.5GHz, delivers customers a consistently strong experience and 87% of 5G traffic is on sites with all three spectrum bands deployed.
T-Mobile’s 5G leadership has translated into overall network leadership, with the company continuing to earn third-party recognition for its overall network performance:
Ookla: In its Speedtest Connectivity United States 1H 2024 report, T-Mobile ranked as the top network performer in seven categories, including wins for fastest overall and 5G network and most consistent overall network, along with best overall and 5G mobile video experience, best gaming experience and highest ranking consumer sentiment.
Opensignal: In its latest USA Mobile Network Experience report, T-Mobile ranked first for all overall network experience metrics while also earning additional wins for 5G with the fastest 5G download speeds, best 5G coverage experience and best 5G availability.
Notes: See 5G device, coverage, and access details at T-Mobile.com. Ookla awards: Based on analysis by Ookla® of Speedtest Intelligence® data for the U.S., 1H 2024. Ookla trademarks used under license and reprinted with permission. Opensignal Awards: USA: Mobile Network Experience Report July 2024, based on independent analysis of mobile measurements recorded during the period March 1 – May 29, 2024. © 2024 Opensignal Limited.
The 5G availability gap between T-Mobile and its competitors measures “what proportion of time people have a network connection, in places they most commonly frequent.” T-Mobile scored 67.9% on average. AT&T managed only 11.8%, while Verizon was on a lousy 7.7%. That gap between one player and the other two on such a seemingly important metric may concern investors in AT&T and Verizon.
87% of T-Mo’s 5G traffic is now carried at sites where equipment supports all three of the 600MHz, 1.9GHz and 2.5GHz spectrum bands. AT&T and Verizon, by contrast, rely partly on airwaves in much higher ranges, including frequencies in and around the 3.5GHz band. Often described as a sweet spot for 5G, combining decent propagation with sufficient capacity, this “C-band” has come in for heavy criticism from Moffett. “Put simply, C-band isn’t very good spectrum,” he said in a research note issued earlier this month.
T-Mo’s CAPEX had decreased and likely will continue to do so. That’s partly why free cash flow is high and rising. Capital expenditure fell from $14 billion in 2022, to $9.8 billion last year, and a dip below the $9 billion mark is now forecast for 2024.
Net postpaid phone additions were up 777,000 in the second quarter, which resulted in T-Mobile having more than 77.2 million postpaid subs in total. For comparison, AT&T has 88 million postpaid subscribers and 19.3 million prepaid subscribers. Verizon has 94 million wireless retail +30.2 million business postpaid connections for a total of 124.2 million postpaid subs.
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Historically a pure-play wireless company, T-Mobile is on a fiber binge. In April, it announced intentions to acquire Lumos through a joint venture with investment firm EQT. More recently, it’s teaming with KKR to invest $4.9 billion for a 50% equity stake in Metronet in a joint venture with KKR. When combined, these deals position T-Mobile to reach about 10 million homes with fiber by the end of 2030. That’s on top of the fiber foray it’s doing with open access network operators like Intrepid Fiber, SiFi Networks and Tillman FiberCo.
T-Mo’s fiber appetite is an adjunct to its fixed wireless access (FWA) service. That’s its high-speed internet service that uses extra capacity on its mobile network. T-Mobile ended Q2 with 5.6 million high-speed internet customers. “We sell fixed wireless access in places in the network where we have excess capacity that won’t be consumed either now or in the future by normal mobile usage,” said T-Mobile Marketing President Mike Katz on the earnings call.
“That’s where we sell fixed wireless. In places where we deploy fiber, there’s an opportunity for us take some of the demand that we’re seeing in fixed wireless where those excess capacity pockets don’t exist and move them to fiber, so there’s really a bunch of complementary features to it,” he continued.
“One thing we feel very strongly about is that these (fiber optic network) transactions are not defensive of our mobile business,” CEO Sievert said. “We believe that our mobile business stands strongly alone. Consumer choice has been made very clear that wireless is a deeply considered sale. It’s the primary purchase decision in a connected life and that people will choose the wireless company that is right for them and we believe we will compete effectively as a pure play wireless company regardless of our simultaneous participation in broadband.”
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References:
https://www.lightreading.com/5g/t-mobile-results-pile-5g-humiliation-onto-at-t-and-verizon
https://www.verizon.com/about/sites/default/files/Verizon_Fact_Sheet.pdf
https://www.t-mobile.com/news/network/t-mobile-kkr-joint-venture-to-acquire-metronet
T-Mobile to acquire UScellular’s wireless operations in $4.4 billion deal
T-Mobile & EQT Joint Venture (JV) to acquire Lumos and build out T-Mobile Fiber footprint
T-Mobile US, Ericsson, and Qualcomm test 5G carrier aggregation with 6 component carriers
Ookla: T-Mobile and Verizon lead in U.S. 5G FWA
T-Mobile combines Millimeter Wave spectrum with its 5G Standalone (SA) core network