T-Mobile US (NASDAQ:TMUS) recently reported third-quarter results. The self-styled "Un-carrier" with a German pedigree swung to a GAAP profit on strong subscriber additions and cost controls. But the numbers never tell the whole story, especially when we're talking about colorful business personalities like T-Mobile CEO John Legere.
As usual, the company held a conference call with analysts following the earnings report. T-Mobile has turned these calls into live-streamed online video events, inviting questions from anybody via social media channels.
The entire 90-minute call is recommended viewing, but you probably don't have that kind of time. So here are five of the most enlightening highlights from this call, culling some answers from T-Mobile CEO John Legere and others from CFO Braxton Carter. From T-Mobile's plans in the upcoming spectrum auction and the impact of a popular handset upgrade program to a rare helping of praise for industry rival Sprint (NYSE:S), it's all here.
1. The upcoming spectrum auction
We're committed to participating vigorously in the incentive auction to fill out and bolster our nationwide low-band spectrum.
This new spectrum is a game-changer for us. It travels twice as far and works four times better in buildings, and you can now use it with all of the new devices, including the iPhone 6s and the 6s Plus.
-- CEO John Legere
This should all be familiar stuff if you have more than a passing interest in the technical side of wireless networks. Still, many investors should appreciate Legere's refresher, here, since you can buy T-Mobile stock without reading up on wireless technicalities.
For a slightly deeper dive into this pool of knowledge, check out the infographic I made on this very topic last year. In short, T-Mobile has a wealth of high-frequency bandwidth, but those signals can only cover roughly 1 square mile per radio tower. 700-MHz radio waves can cover about 10 times that service area, and also penetrate buildings much better.
Low-frequency licenses can support a more complete coverage map while also cutting down the number of radio towers required. Higher efficiency, lower costs. This is beachfront real estate in the world of wireless spectrum licenses. And the Federal Communications Commission is set to auction off a ton of these licenses in 2016, snagged from a TV broadcast industry that doesn't really need them anymore.
Just as a reminder, our financial guidance excludes any benefit from the impact of JUMP! On Demand and Data Stash. We will disclose the aggregate non-cash impact from JUMP! On Demand and Data Stash in future quarters.In the third quarter, the aggregate impact was immaterial, as JUMP! On Demand is just beginning to scale.
-- CFO Braxton Carter
T-Mobile's latest handset upgrade program will be disclosed in great detail in future quarters, but it's still too new to really move the needle on the cost side. For now, T-Mobile claims the JUMP! program is helping the company acquire new customers, and that the cash costs of this lease-style option will become more obvious in coming quarters.
3. Credit where credit is due
I would expect Sprint to post some positive phone results this quarter. I think they've been doing a good job, but I'll just point out that this was nine quarters in a row that the postpaid porting against Sprint is 2-to-1 or greater, and that's the trend we're at now. ...
It's pretty clear that it's not important to us for Sprint to fail, as you can see here. And frankly, if they do report strong results, it's not at our expense, which I think is good for the industry and good for the consumers.
John Legere is not exactly known for praising the enemy. Far more likely to jump down their throats with a well-placed insult, he has taken to renaming the two largest American networks "Dumb and Dumber." But he did take time out of this call to heap some positive words on Sprint.
Sure, Legere couldn't help pointing out that subscribers move from Sprint to T-Mobile much more often than they make the opposite move, but he also made it clear that Sprint isn't the enemy. The two companies have been the subjects of merger rumors before, and maybe Legere is keeping that door open -- just a crack, a thin sliver, but nonetheless open. Insulting a potential future partner is rarely a good move, after all.
4. Read my lips: No more stock sales
We believe that we have more than adequate cushion from a leverage ratio standpoint with no adverse consequence to our existing bond holders or our corporate rating to fully fund whatever we need to do in the upcoming broadcast incentive auction.
We currently have no intent to access the market from an equity standpoint or any equity-linked securities. We've met with all the major rating agencies, have confirmed that position.
So T-Mobile has no plans to sell additional stock in the near future, not even to finance its actions in the spectrum auction. On the other hand, the bond market remains open for business, and T-Mobile is likely to make several trips to that well.
Indeed, the company announced a bond sale on Monday morning. The size of this bond-backed loan was not spelled out, but the funds will be partly earmarked for spectrum auction costs. The company also doubled the size of its revolving credit line to $2 billion for much the same reason.
T-Mobile is getting ready to spend some serious cash; management just won't dilute the shares to get it done.
5. Finding a new market home
The T-Mobile team and I just rang the NASDAQ opening bell about 30 minutes ago, and our stock began trading on the NASDAQ under our ticker symbol TMUS. We're a mobile Internet company, and we like to disrupt things. So I think we have a lot more in common with the tech companies of Silicon Valley that are traded here on the NASDAQ.
Finally, T-Mobile moved from one stock exchange to another on the very eve of this earnings report.
As Legere explained on the earnings call, the NASDAQ exchange is home to a plethora of technology giants and thus makes an appropriate market for this innovative telecom. On a more pragmatic level, NASDAQ's listing requirements and registration fees are a bit looser than those of the NYSE, though the difference isn't much for large and well-capitalized companies such as T-Mobile.
If nothing else, the move gave Legere another turn in the national spotlight: ringing that opening bell. I can't think of a bigger extrovert, so there's a personal angle to this shift as well.
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