T-Mobile US Inc. reported another quarter of strong subscriber gains, helping the wireless company boost revenue 11% and swing to a profit.
The No. 3 U.S. carrier has been adding millions of customers in recent years in a competitive industry where most people already have a phone and a service provider. Mainstream phone additions, the most lucrative kind for wireless providers, fell to 877,000 from 991,000 from a year ago, but is still likely to eclipse the results of other major U.S. carriers.
Verizon Communications Inc. lost a net 8,000 mainstream phone connections, it said last week, and analysts expect AT&T Inc. to report a decline as well on Tuesday afternoon. Sprint Corp., which reports next week, may show growth but isn’t expected to approach T-Mobile, according to analysts.
"The service revenue is really the driver and that really is a function of our rapidly expanding customer base," said Chief Financial Officer Braxton Carter in an interview, noting that the rising number of customers is driving down the cost of service per connection. "So you see that on the bottom line."
Overall, T-Mobile reported a profit of $479 million, or 56 cents a share, compared with a loss of $63 million, or nine cents a share, a year earlier. Excluding a gain from an airwave transaction with AT&T, adjusted earnings were 10 cents a share.
Revenue rose 11% to $8.6 billion, driven by a 13% increase in service revenue to $6.6 billion.
The company, which also owns the MetroPCS prepaid service, now expects 3.2 million to 3.6 million mainstream net adds this year from a previous range of 2.4 million to 3.4 million. It added 4.5 million such customers in 2015. T-Mobile ended March with 51.2 million retail customers, including 18.4 million prepaid customers.
It also predicts $9.7 billion to $10.2 billion in adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, for the year, up from previous guidance for $9.1 billion to $9.7 billion. That compares with $7.39 billion in 2015.
"We expect subscriber momentum to remain strong as industry pricing is relatively benign and Sprint is focused on cost-cutting instead of adding subscribers," said JPMorgan analyst Philip Cusick.
T-Mobile on Tuesday said it agreed to sell up to $1.35 billion in senior notes to majority owner Deutsche Telekom AG, primarily for the purpose of buying airwaves. The company is also in talks for an additional $650 million from Deutsche Telekom, completing its $9 billion of fundraising in preparing for a coming U.S. government airwaves auction.
In a sign of T-Mobile’s turnaround — it once fed its rivals with millions of customers a year — Mr. Carter said the company would consider returning cash to shareholders once the auction is completed and it possibly pays down some debt.
"The business is generating true cash," he said, noting that buybacks wouldn’t be soon. "That is not in the short term; that is more a midterm aspiration."
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