T-Mobile Q4 Preview: Will Robust Subscriber Numbers Translate Into Strong Results?

T-Mobile (NASDAQ:TMUS), the third-largest U.S. wireless carrier, is expected to publish its Q4 2018 results on February 7, reporting on a quarter that saw the carrier post solid subscriber gains in its postpaid wireless business. In this note, we take a look at some of the trends that could drive the company’s earnings for the quarter.

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Solid Postpaid Adds, But ARPU Will Be A Key Factor To Watch

T-Mobile has already published its subscriber figures for the quarter, noting that it added a total of 1.4 million postpaid subscribers, a Q4 record, while adding 1 million postpaid phone customers  (its best holiday quarter in four years). In comparison, Verizon added a net of 650k phone subscribers, while AT&T added 134k postpaid phones. Sprint, on the other hand, lost a net of 26k postpaid phone subscribers over the quarter. While the carrier has likely been benefiting from some equipment promotions, it has also been expanding its reach via improved coverage as well as a larger footprint of brick and mortar stores.

T-Mobile has also done a good job of retaining existing customers, with branded postpaid phone churn standing at 0.99%, marking a decline of 19 basis points year-over-year. Meanwhile, its three rivals all saw subscriber churn trend slightly upwards over the holidays. This is likely being driven by the company’s recent overhaul of its customer service operations as well as its move to bundle video services such as Netflix with some family plans.

We will be closely watching T-Mobile’s postpaid phone ARPU. The metric has come under some pressure over the last few quarters, driven by a larger mix of customers adopting its tax-inclusive plans, which effectively lower the company’s revenue. However, this could be partly offset by lower service-related promotions as well as a larger mix of subscribers on One unlimited plans.

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