Key Trends To Watch As T-Mobile Reports Q3 Results

by Trefis Team
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T-Mobile U.S. (NASDAQ:TMUS), the third-largest U.S. wireless carrier, is expected to publish its third quarter results early next week, reporting on a quarter that saw significant competition in the wireless market. Below we take a look at some of the key trends we will be watching when the carrier reports earnings.

We have a $66 price estimate for T-Mobile, which is slightly ahead of the current market price.

See our complete analysis for  Verizon | AT&T |T-MobileSprint 

Subscriber Metrics Should Remain Strong

While competitive pressures have mounted in the postpaid wireless space, with market leaders Verizon and AT&T launching unlimited plans of their own earlier this year and Sprint continuing its aggressive promotions for new subscribers, we believe T-Mobile will continue to lead the industry in terms of postpaid phone adds. Over Q2, the carrier’s net postpaid phone subscribers adds accelerated to 786k, compared to 646k in the year-ago period. The company’s results this quarter could be driven by traction in its business channels, as well as the launch of two new iconic devices over the period, namely the iPhone 8 and Samsung Note 8.

T-Mobile’s churn figures could remain low over Q3 (they stood at  1.1 % in Q2), as the carrier benefits from its improving network quality, value-added services, and a growing number of postpaid subscribers per account (~2.9 subscribers per account as of Q2’17, versus ~2.6 in Q2’16). Moreover, the launch of the new iconic devices from Samsung and Apple is unlikely to result in churn among the major carriers, as promos were much less attractive compared to previous years.

Profitability Could Improve On Better Cost Absorption 

T-Mobile has been making progress in shoring up its profitability, as its operating costs have been growing at a slower pace compared to its revenues. During Q2, the company’s quarterly net income more than doubled year-over-year to $581 million, while adjusted EBITDA margins stood at 40% in Q2 2017, compared to 37% in Q2 2016. While the company’s ARPU could be capped in the near term on account of unlimited plans, T-Mobile does appear to be more reluctant to play the pricing card. For instance, in July, the carrier increased the price of its T-Mobile One Plus plan – which includes better hotspot speeds and HD video streaming – by $5, bringing the total cost of a single line to $80 per month instead of $75.

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