Image source: T-Mobile.
I have a confession to make: I was wrong about T-Mobile (TMUS +0.47%) not being able give away lots of freebies and grow revenue at the same time. At least, I'm wrong about it right now, and for the foreseeable future.
Back in January, I wrote an article questioning that T-Mobile would be able grow its customers at the astonishing rate it has in the past without significantly hurting revenue growth or pushing down average revenue per user (ARPU).
Here are two quotes from my previous article:
For those watching T-Mobile, it seems like Legere and his company have been hosting a huge customer acquisition party for the past few years, giving out SWAG bags of wireless goodies. And to the carrier's credit, lots of customers have wanted to join in. Over the past year, T-Mobile added 8.3 million net customers (I'm one of them), an increase of more than 14% year over year. But at times it's hard to believe that T-Mobile's growth party can continue to rage on.
And I concluded the article with:
Like any college student nearing the end of their time in school, T-Mobile would do well to start looking for a long-term strategy for making money.
But T-Mobile proved me wrong on both counts in its Q1 2016 earnings report.
The nation's third-largest carrier amassed 2.2 million net customer adds in the quarter. That marks 12 consecutive quarters of more than 1 million net adds for the carrier.
And remember that all that growth comes at the expense of its competitors. The carrier said 80% of the carrier's imported customers come from Verizon Communications (VZ 0.12%) and AT&T (T 1.14%).
And then there's the company's financials. T-Mobile was able to increase revenue more than 10% year over year to $8.6 billion, and service revenue increased to $6.6 billion, up 13% year over year.
I was previously skeptical about T-Mobile's ARPU growth, and in fact, it did fall slightly from $46.43 in Q1 2015 to $46.21 in Q1 2016. But the 0.5% change is clearly flat on a year-over-year basis -- and not all that troubling at this point. Average revenue per user fell on a sequential basis, but T-Mobile said that's because of the "non-cash net revenue deferral related to Data Stash," and the number was relatively stable on both a sequential and year-over-year basis when excluded.
Meanwhile, T-Mobile eked out a 1.6% average billing per user (ABPU) increase year over year.
The company also increased its full-year adjusted EBITDA to be in the range of $9.7 to $10.2 billion, up from the previous guidance of $9.1 to $9.7 billion.
The conclusion
So, it would appear T-Mobile can, at least in the first quarter of 2016, keep its customer acquisition party raging by giving away freebies like Music Freedom, Data Stash, Binge On, etc., and increase revenue growth at the same time.
As analysts at MoffettNathanson noted -- reported by FierceWireless -- "A return to positive growth, even if minuscule, goes a long way toward refuting the premise that T-Mobile is excessively discounting."
I'll continue to watch how additional UnCarrier services impact the wireless provider, but if T-Mobile can continue to make impressive customer gains and maintain (or increase) ARPU, then the company may keep proving all of us skeptics wrong.
