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T-Mobile Earnings Jump 48%

By Joe Tenebruso – Nov 1, 2018 at 11:43AM

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Customer gains and tax savings helped boost the wireless carrier's profits in the third quarter.

T-Mobile's (TMUS 2.42%) rapid growth is helping it gain ground on industry titans Verizon and AT&T, as evidenced by its strong third-quarter financial results released on Oct. 30. 

T-Mobile results: The raw numbers

Metric

Q3 2018

Q3 2017

YOY Change

Revenue

$10.84 billion

$10.02 billion

8.2%

Net income

$795 million

$550 million

44.5%

Earnings per share

$0.93

$0.63

47.6%

Data source: T-Mobile Q3 2018 earnings release. YOY = year over year.

What happened with T-Mobile this quarter?

T-Mobile continues to take share of the massive U.S. wireless industry. The company added 1.6 million net new customers, including 1.1 million postpaid subscribers, who pay monthly bills and tend to be the most profitable customers for wireless carriers.

Of these new postpaid subscribers, 774,000 were phone activations. This significantly outpaced the results of industry giants Verizon and AT&T, which added 295,000 and 69,000 respective postpaid phone connections during the same period.

A person pointing at an upwardly sloping chart.

T-Mobile continues to add subscribers at a rapid clip. Image source: Getty Images.

Better still, T-Mobile is enjoying strong loyalty among its existing customers: The company's branded postpaid phone churn rate improved 21 basis points year over year, to 1.02% in the third quarter. These gains have come as the company is progressing with its blockbuster merger with Sprint (S) -- T-Mobile announced that it has received shareholder approval for the deal.

"We continue to drive our business beyond expectations and despite the work under way to close the merger, we delivered our best financials ever in Q3," CEO John Legere said in a press release. "Our customer growth accelerated again, benefiting from the investments we are making in network and in customer experience, leading to 22 quarters in a row with more than 1 million net customer additions."

These customer gains fueled an 8% rise in revenue, to $10.8 billion, and a 15% jump in EBITDA -- adjusted to exclude stock-based compensation and certain other items -- to $3.2 billion.

All told, net income -- which was positively impacted by a lower effective tax rate resulting from tax reform -- soared 45%, to $795 million. And earnings per share, boosted by share repurchases, leapt 48%, to $0.93.

Looking forward

These strong results prompted T-Mobile to raise its full-year guidance. Management now expects:

  • Postpaid net customer additions of 3.8 million to 4.1 million, up from a previous forecast of 3 million to 3.6 million.
  • Adjusted EBITDA of $11.8 billion to $12.0 billion, up from $11.5 billion to $11.9 billion.

During a conference call with analysts, Legere also said that while the regulatory review of T-Mobile's pending merger with Sprint is not yet complete, he expects the deal to close in the first half of 2019. "We have completed a number of major milestones and remain optimistic and confident that once the facts are reviewed by regulators, they will recognize the significant pro-competitive and pro-consumer benefits of this combination," Legere said.

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

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Stocks Mentioned

T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
TMUS
$135.89 (2.42%) $3.21
Sprint Corporation Stock Quote
Sprint Corporation
S

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