How Will AT&T and Verizon’s Unlimited Plans Impact T-Mobile’s Q1 Results?

T-Mobile (NYSE:TMUS), the third largest U.S. wireless carrier, will report its Q1 2017 results after the bell on Monday April 24. We expect the carrier’s earnings to trend higher, amid a growing post-paid and prepaid wireless phone subscriber base and potentially better margins. Below, we provide a brief summary of what to expect when the company reports earnings.

Trefis has a $64 price estimate for T-Mobile, which is roughly in line with the current market price.

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Postpaid Adds Will Remain Robust, But Expect A Year-Over-Year Slowdown

Q1’17 was relatively eventful in the postpaid wireless market, as Verizon reintroduced its unlimited plan during the quarter, doing away with its longstanding policy of offering tiered data plans, while AT&T began offering unlimited data to its mainstream subscribers (previous plans were limited to its DirecTV subscribers). However, we do not expect this to impact T-Mobile significantly, as the carrier has tweaked its own unlimited offering – T-Mobile One – introducing all-in pricing that includes all taxes and fees into the advertised price, while also adding HD video streaming option.

Moreover, if Verizon’s recent earnings are any indicator, T-Mobile doesn’t have much to be worried about, as Verizon actually lost a net of 289k retail postpaid phone connections during Q1 – marking its worst performance ever. That said, the pace of T-Mobile’s overall net adds could decline on a year-over-year basis, amid slower industry gross adds and the lack of major handset launches. Overall, we expect ARPU to remain relatively flat, as the One plans are priced slightly higher compared to previous entry level tiered offerings, helping to negate the impact of higher-end customers migrating to tiered plans and the introduction of the all-in pricing.

We expect T-Mobile’s prepaid business to also fare well, driven by its budget MetroPCS brand, continued growth in new markets and an expanding distribution footprint. During Q4 2016, prepaid adds stood at 541k, marking a 15.4% improvement on a year-over-year basis. Prepaid ARPUs could also see an uptick, driven by higher data attach rates for prepaid plans.

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