Stock investment – T-Mobile US Earnings Surge on 1.3 Million Subscriber Additions — The Motley Fool

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T-Mobile US (NASDAQ:TMUS) reported second-quarter results on July 19. The No. 3 U.S. wireless carrier delivered strong revenue and profit growth fueled by what are likely to be industry-leading customer gains.

T-Mobile results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change


Revenue

$10.213 billion

$9.287 billion

10%

Net income

$581 million

$225 million

158%

Earnings per share

$0.67

$0.25

168%

Data source: T-Mobile Q2 2017 earnings release (opens PDF).

What happened with T-Mobile this quarter?

T-Mobile added 1.3 million net new customers, bringing its total subscriber count to 69.6 million and extending its streak of adding more than 1 million customers to 17 consecutive quarters. T-Mobile added 817,000 total postpaid subscribers — who pay monthly bills and are typically the most sought-after customers for wireless carriers — during the second quarter, including 786,000 net postpaid phone customers.

T-Mobile expects these figures to lead the industry for the sixth consecutive quarter — a notable accomplishment considering that industry leader Verizon Communications (NYSE:VZ) finally succumbed to the pressure of customer losses and began offering unlimited data plans earlier this year. Yet while Verizon may have slowed its subscriber defections, it didn’t stop them, and now it appears that it also didn’t halt T-Mobile’s market-share gains.

T-Mobile CEO John Legere. Image Source: T-Mobile.

CEO John Legere, who once again pulled no punches in his press-release statement, said that T-Mobile also gained the upper hand in network speeds after Verizon and fellow industry titan AT&T (NYSE:T) moved to match T-Mobile’s unlimited data offerings. “Our network just keeps getting better and faster while the Duopoly’s networks seem to be choking after we forced them to go unlimited,” Legere said. “Make no mistake about it, the Un-carrier will not stop forcing change in this industry and our Q2 results are more proof that consumers are responding!”

To Legere’s point, consumers do seem to be responding favorably to T-Mobile’s offerings, as evidenced by both its industry-leading new-subscriber additions and its record low postpaid phone churn — or customer defections — which fell to 1.10%, down 17 basis points compared to the prior-year period.

In all, T-Mobile’s strong customer retention and subscriber growth fueled a 10% year-over-year increase in total revenue, to $10.2 billion. In turn, earnings before interest, taxes, depreciation, and amortization (EBITDA) — adjusted to exclude stock-based compensation and certain non-recurring items — jumped 19%, to $3 billion. Adjusted net income surged 158%, to $581 million, or $0.67 per share.

Looking forward

These results prompted T-Mobile to boost its full-year subscriber-growth forecast to a range of 3.0 million to 3.6 million branded postpaid net additions, up from previous estimates of 2.8 million to 3.5 million. The company also raised its adjusted EBITDA guidance to $10.5 billion to $10.9 billion from $10.4 billion to $10.8 billion.

Peering out even further into the future, T-Mobile remains confident in its ability to grow its operating and free cash flow at annualized rates of 15% to 18% and 45% to 48%, respectively, from fiscal 2016 to fiscal 2019.

Legere also made some predictions during T-Mobile’s earnings conference call:

I predict that T-Mobile will be the only provider to grow total wireless revenues by double digits year-over-year. I predict that we’ll be the only carrier to grow wireless service revenues at all year-over-year. And I predict that we will take all of the industry’s postpaid phone growth again, at the same time achieving record profitability and strong free cash flow growth.

While these are bold statements, T-Mobile has a history of delivering on Legere’s promises.

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

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