Note: Interpretations of the quarterly earnings data provided by T-Mobile are the opinions of The Mobile Report.
T-Mobile’s Q2 2023 earnings have been revealed, and the Un-Carrier has a lot to be excited about. It has been nearly 11 years since John Legere took over the company at this point. The trajectory they have set themselves on since then continues to turn heads. So, what is T-Mobile particularly fond of this time around?
A fair warning, this will be an in-depth and slightly nerdy dive into T-Mobile’s quarterly earnings.
Quarterly Performance Raises T-Mobile End-Of-Year Projections
T-Mobile had a lot of great things to say about the quarterly earnings. Here is an overview.
T-Mobile is all about setting the standard for subscriber counts here. They say they lead the industry in multiple postpaid categories. Examples provided include net account additions, net customer additions (“lines” added to accounts, including watches, tablets, etc.), and phone net customer additions (“phone only” lines).
It doesn’t stop there, with 509k HSI (High-Speed Internet, aka Home Internet) net customer additions being more than AT&T, Verizon, Comcast, and Charter combined. And that’s the fifth quarter in a row.
Revenue, income, and cash metrics all saw year-over-year growth as well, leading to $7.3 billion dollars in core adjusted EBITDA. EBITDA is an important indicator for investors and for companies – it stands for earnings before interest, taxes, depreciation, and amortization. Think of it as how much money T-Mobile generates without accounting for non-operating costs, like interest rates or taxes.
As a result, T-Mobile has made some positive changes to their 2023 guidance. Guidance is essentially what they tell investors to anticipate or estimate T-Mobile’s performance to be. This is an indicator that they are expecting better success than they initially thought going into the year.
There are some additional expenditures ($50 million for capital), but those are significantly offset by more postpaid net customer additions, merger synergies, and net cash provided by operating activities. All of this feeds into an increased core adjusted EBITDA. In the end, they’re telling investors they plan to take good results to even better places by the end of the year.
T-Mobile is essentially upping their own stakes, saying they will beat their original projections, which were already industry-leading. Quite the tell that things are going well for them in 2023, with some of that revenue undoubtedly sourced by less-than-favorable changes like charging during suspensions, in-store payment fees, or the increase in late fees.
Customer-Centric Key Callouts
Here are some interpretations of the data also provided in the quarterly earnings report centered around customers.
First, we have ARPA (average revenue per account) and ARPU (average revenue per unit).
ARPA has been on a slight incline since Q3 2022, which T-Mobile attributes to continued adoption of the High Speed Internet product (Home Internet) and success with higher-end rate plans and premium services.
ARPU, however, is stagnant – while increasing $0.21 over Q1, it is still lower than any amount three quarters before that. The big three provide similar insight to a stagnant ARPU – offsets for promotions and higher-end rate plans.
In the end, T-Mobile appears to provide the best value when comparing available competitor data. Their $138.94 revenue per account is far lower than Verizon’s $154.51, meaning accounts spend less as a whole being at T-Mobile. This does not account for account size or line counts, so that is something to consider.
AT&T’s $55.63 ARPU is a big jump from T-Mobile’s $48.84, implying lines of service are significantly cheaper overall at T-Mobile. That being said, again, this doesn’t account for the services those lines are taking advantage of, so there might be value hidden away in that higher price. The numbers don’t tell the whole story, but the staggering differences are a bit telling when it comes to customer value.
As overall subscribers for T-Mobile High Speed Internet grows, the growth itself has been in decline for four quarters straight. Though the company saw a roughly 2k increase in postpaid subscribers, the dip in prepaid subscribers did not push the total enough for a gain quarter to quarter.
The good news for them is that there is still growth. The bad news is T-Mobile hopefully isn’t seeing the bubble burst and slowly deflate on the potential of the product’s market.
Revenue-Centric Key Callouts
T-Mobile saw a couple of interesting data points when it comes to their revenue streams as a business in the report as well.
Equipment revenues took a significant decline not only compared to last quarter (-14%), but also YoY (-23%). It’s true that a lot of equipment changes occurred as a result of the Sprint merger, and customers continuing to move to compatible devices on the T-Mobile network.
T-Mobile shouts out twice that device lifecycles are longer than in prior years, however. This means customers are picking up new devices less often, as the devices they are getting work perfectly fine for a longer lifespan. This is a win for the consumer, but it comes at a cost to T-Mobile.
Before raising the alarm comparing to Q4 2022, remember that there is a particular fruit-named company that releases a phone every year around that time. Along with the holiday season, it is a notable and expected jump. With Q2 2023 this low, and seeing a dip between Q2 and Q3 last year, it’ll be interesting to see what this looks like in the next quarterly earnings report.
Finally, T-Mobile appears to be running more efficiently quarter after quarter. The merger continues to be a pain point, and rolling out that award-winning 5G network isn’t cheap. However, merger-related costs are declining.
Costs are also reducing from selling off the Wireline Business and other network optimizations. T-Mobile is still finding the floor here in the post-merger world, and they stand to benefit from this number continuing to fall.
The Un-Carrier continues to see massive success in 2023. Eleven years after John Legere became CEO, three years after the merger with Sprint, and the magenta train continues to rumble down the tracks.