Tags: T-Mobile | Subscriber | Forecast | Earnings Estimates

T-Mobile Raises Subscriber Forecast After Beating Estimates

Tuesday, 28 Oct 2014 08:24 AM

T-Mobile US Inc. increased its full- year subscriber forecast after adding more customers than analysts estimated, as it challenges rivals with cheaper plans that are putting a dent in industry profits.

The fourth-largest U.S. wireless carrier added 1.4 million customers through its own brands in the third quarter, beating the 1.14 million average projection in a Bloomberg survey of 10 analysts. The price competition took a toll on profit, with T-Mobile reporting a net loss of 12 cents a share for the period, widening from 5 cents a year earlier.

Chief Executive Officer John Legere has positioned the company as the “un-carrier” by cutting data-plan prices, financing phones and offering new customers as much as $650 for switching service providers. Larger rivals AT&T Inc., Verizon Communications Inc. and Sprint Corp. have been forced to respond with promotions and discounts to hold on to subscribers. Both AT&T and Verizon missed third-quarter earnings estimates.

“Customer growth momentum seems to be intact but does not come for free,” Wolfgang Specht, an analyst at Bankhaus Lampe, wrote in a note. “It remains to be seen if Deutsche Telekom will allow its U.S. unit to continue the current aggressive strategy if it wants to keep its 2015 target.”

Legere boosted his forecast for subscribers, projecting that Bellevue, Washington-based T-Mobile will add 4.3 million to 4.7 million new monthly customers this year. The carrier, which is controlled by Deutsche Telekom AG, previously said it expected to add 3 million to 3.5 million subscribers and to surpass Sprint in combined prepaid and postpaid customers.

Best Growth

Legere tweeted that it was the best growth quarter in the company’s history.

The carrier, which now has 52.9 million customers, maintained its full-year forecast for $5.6 billion to $5.8 billion in adjusted earnings before interest, taxes, depreciation and amortization.

The promotions to attract subscribers come at a cost for T- Mobile, which said it expects earnings to be at the very low end of the range given “expected customer growth momentum.”

In the third quarter, adjusted Ebitda of $1.35 billion fell short of analysts’ average projection for $1.5 billion, according to estimates compiled by Bloomberg. Revenue rose to $7.35 billion, compared with estimates for $7.47 billion. Analysts had expected net income of 5 cents a share.

Adjusted Ebitda as a percentage of service revenue was 24 percent in the third quarter, narrowing from 26 percent a year earlier.

Not ‘Value Leader’

Unlike competitor Sprint, T-Mobile isn’t looking to offer the lowest prices, Legere said.

“Most of what we’ve done in the last year is raise price,” Legere said at the Code/Mobile conference in Half Moon Bay, California, after T-Mobile released earnings. “I never said we are going to be the value leader.”

In the quarter, the average monthly-customer phone bill of $49.84 was up about 1 percent from the second quarter. Analysts estimated $48.55 on average. T-Mobile said the average bill will be down about 2.5 percent in the fourth quarter partly because of promotions, and then rise sequentially in the first quarter of 2015.

Shares of T-Mobile fell 0.5 percent to $27.99 at the close in New York before the results. The stock has declined 17 percent this year. Deutsche Telekom rose 2.8 percent to 11.41 euros at 9:45 a.m. in Frankfurt.

While gaining customers is costly, T-Mobile’s “growth is sustainable,” Legere said. The company plans to grow both “organically and inorganically.”

The acquisition of MetroPCS Communications Inc. last year has been a success that led to cost savings, he said.

Failed Takeovers

The executive is seeking to prove T-Mobile can thrive on its own after three aborted takeover attempts in the past three years. Earlier this month, Iliad SA scrapped its offer to buy a majority stake in T-Mobile, joining Sprint and AT&T in failing to win control of the company.

For now, T-Mobile remains two-thirds owned by Deutsche Telekom. A fourth suitor could emerge in Charlie Ergen, chairman of Dish Network Corp., who contacted Deutsche Telekom to say he is interested in a future acquisition of T-Mobile, people with knowledge of the matter said in September.

Board members of Deutsche Telekom have been split over whether the German carrier should sell its only growing asset, people familiar with the matter said last month. Deutsche Telekom CEO Timotheus Hoettges said in an Oct. 21 interview that T-Mobile can sustain itself as a standalone business. Legere has expressed confidence that his overseers in Germany are backing his strategy.

Legere expects increasing competition in the U.S. wireless industry, with at least three new players entering the market within five years, he said, without elaborating.

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T-Mobile US Inc. increased its full- year subscriber forecast after adding more customers than analysts estimated, as it challenges rivals with cheaper plans that are putting a dent in industry profits.
T-Mobile, Subscriber, Forecast, Earnings Estimates
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2014-24-28
Tuesday, 28 Oct 2014 08:24 AM
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