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T-Mobile Continues to Take Share From Its Rivals

By Joe Tenebruso - Oct 24, 2017 at 10:02PM

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The wireless carrier added more than 1 million customers for the 18th consecutive quarter.

T-Mobile US ( TMUS 2.18% ) reported third-quarter results on Oct. 23, and the No. 3 U.S. wireless carrier furthered its assault on industry titans Verizon ( VZ 1.36% ) and AT&T ( T 1.78% ).

T-Mobile results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$10.019 billion

$9.305 billion

8%

Net income

$550 million

$366 million

50%

Earnings per share

$0.63

$0.42

50%

Data source: T-Mobile Q3 2017 earnings release.

What happened with T-Mobile this quarter?

T-Mobile added 1.3 million net new customers, which helped its total subscriber count top 70.7 million by the end of the third quarter. Of those new customers, 817,000 were of the postpaid variety, including 595,000 net postpaid phone customers. Postpaid subscribers pay monthly bills and are typically the most valuable customers for wireless carriers.

T-Mobile continues to use innovative promotions to fuel its customer growth. In September, it announced that its family plans will now include a free Netflix ( NFLX -2.33% ) subscription.

T-Mobile CEO John Legere standing next to a sign that says "T-Mobile plus Netflix on us"

Image Source: T-Mobile US.

In the press release announcing the deal, the company stated:

T-Mobile has completely disrupted wireless, and Netflix has totally disrupted entertainment. What happens when you bring two disruptors together? Get ready to find out!

Well, early evidence suggests that what happens is more people become customers of T-Mobile and, ostensibly, Netflix. Better still, the Netflix promotion may also be helping T-Mobile retain more of its existing customers, as postpaid phone churn improved by 9 basis points year over year.

All told, T-Mobile's customer growth drove an 8% year-over-year increase in total revenue, to $10 billion. In turn, EBITDA -- adjusted to exclude stock-based compensation, spectrum gains, and certain other items -- rose 5% to $2.8 billion.

CEO John Legere, in his typical unabashed style, praised T-Mobile's performance in its earnings release:

Just step back and look at these financial results -- they're incredible! Record service revenues, record free cash flow, record Q3 adjusted EBITDA -- and that's on top of 18 quarters in a row with more than one million customers added. We're delivering results that no one else can match and have proven time and time again that we know how to fight for customers and win for shareholders. We won't stop!

Legere may be more flamboyant than the average CEO, but T-Mobile continues to back up his bold statements.

Looking forward

T-Mobile raised its 2017 full-year subscriber growth forecast to between 3.3 million and 3.6 million branded postpaid net additions, up from 3.0 million to 3.6 million. It also increased its adjusted EBITDA guidance to a range of $10.8 billion to $11.0 billion, up from a range of $10.5 billion to $10.9 billion.

Notably, T-Mobile declined to conduct its usual conference call with analysts after its earnings release. In a question-and-answer document (opens a PDF) posted to its investor-relations website, the company stated:

Our incredible Q3 results speak for themselves! We want to keep the focus on those results, without letting them be drowned out by the rumors that have been swirling around. As it relates to those rumors, we've got nothing to share.

The rumors T-Mobile is referring to are recent reports that it will merge with No. 4 U.S wireless carrier Sprint ( S ). Such a deal could make the combined company an even more formidable foe to current industry leaders Verizon and AT&T. However, even if T-Mobile and Sprint were to agree to a merger, regulators would probably give it heavy scrutiny.

Regardless, with another quarter of what's expected to be industry-leading customer gains, T-Mobile continues to expand its share of the massive U.S. wireless industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
TMUS
$112.77 (2.18%) $2.41
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$51.42 (1.36%) $0.69
Sprint Corporation Stock Quote
Sprint Corporation
S
AT&T Inc. Stock Quote
AT&T Inc.
T
$23.46 (1.78%) $0.41
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$602.13 (-2.33%) $-14.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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