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T-Mobile's aggressiveness brings in 1.65 million new customers, but also costs them $20 million in Q4

T-Mobile's aggressiveness brings in 1.65 million new customers, but also costs them $20 million in Q4

The old adage goes that you have to spend money to make money, and that's exactly what T-Mobile's been doing. Today the fourth-place US carrier reported their Q4 2013 earnings and the results were mixed. While they added 1.65 million new customers — good for the long haul — the hyper-aggressive marketing and incentives resulted in a quarterly loss of $20 million. Granted, that's on revenue of $6.8 billion for the quarter, an increase of 39% from this time last year. But a loss is a loss.

T-Mobile CEO John Legere, not one for mincing words, said:

"Customers are fed up with the old ways and are voting in favor of choice, innovation and doing business with a company that cares about them and is willing to earn their business. For shareholders, we transformed the company into a fierce, growing competitor that is changing the wireless industry and creating significant value."

Of course, it remains to be seen how long T-Mobile will be able to keep up this aggressive path of conquest. It's expensive to buy new customers as they have for the past year (as these results have borne out), but the changes that T-Mobile has implemented to their business have created waves in the American carrier landscape and might finally be changing things for the better.

T-Mobile US Reports Fourth Quarter and Full Year 2013 Results and Third Consecutive Quarter of Over One Million Net Customer Additions

More than 1.6 million net customer additions including 869,000 branded postpaid net customer additions

Fourth Quarter 2013 Highlights:

  • Total net customer additions of more than 1.6 million
  • 981,000 total branded net customer additions with 869,000 branded postpaid net additions, representing the best branded postpaid performance since the fourth quarter of 2005
    • Improving branded postpaid phone net additions of 800,000 and 69,000 mobile broadband net additions
    • Accelerating branded prepaid customer growth with 112,000 net customer additions
  • Continued low branded postpaid churn of 1.7%, flat quarter-over-quarter and down 80 basis points year-over-year, resulting in the best quarter of year-over-year churn reduction in 2013
  • Delivered third consecutive quarter of sequential service revenue growth
  • Strong Adjusted EBITDA of $1.239 billion and Adjusted EBITDA margin of 24% combined with significant customer growth
  • Successful modernization program delivers nationwide 4G LTE network coverage to 209 million people in 273 metro areas

Full Year 2013 Highlights:

  • Total net customer additions of more than 4.4 million on a pro forma combined basis
  • 2.4 million total branded net customer additions including 2 million branded postpaid and 359,000 branded prepaid customers on a pro forma combined basis
  • Branded postpaid churn of 1.7%, down 70 basis points year-over-year
  • Adjusted EBITDA of $5.317 billion and Adjusted EBITDA margin of 26% on a pro forma combined basis
  • Successful introduction and execution of major Un-carrier initiatives
  • Rapid progress with the integration of MetroPCS by expanding the brand into 30 additional markets
    • Currently 3.5 million MetroPCS customers on the T-Mobile network
  • Met or exceeded all company guidance targets for 2013

BELLEVUE, Wash. - February 25, 2014 - T-Mobile US, Inc. (NYSE: TMUS) today reported fourth quarter and full year 2013 results demonstrating that its Un-carrier strategy is successfully delivering results. The Company has aggressively focused on eliminating customer pain points and is delivering continued growth in its total and branded customer base through the successful execution of this strategy.

T-Mobile reported more than 1.6 million total net customer additions with 981,000 total branded net customer additions for the quarter, including branded postpaid net additions of 869,000 and branded prepaid net additions of 112,000. The strong branded postpaid net addition performance is the result of continued momentum in gross additions, which were up 15% quarter-over-quarter and 80% year-over-year, and the continuation of low branded postpaid churn, which was 1.7% in the quarter. For the full year 2013, on a pro forma combined basis, T-Mobile added more than 4.4 million total customers and more than 2 million branded postpaid customers.

"Our performance in the fourth quarter and the full year is clearly proving that we have our strategy right and that we are executing it well," said John Legere, President and CEO of T-Mobile. "Customers are fed up with the old ways and are voting in favor of choice, innovation and doing business with a company that cares about them and is willing to earn their business. For shareholders, we transformed the Company into a fierce, growing competitor that is changing the wireless industry and creating significant value."

Executing on the Un-Carrier strategy to drive results:

T-Mobile began rolling out its Un-carrier offers in March 2013. The Company's key Un-carrier initiatives were as follows:

  • On March 26, 2013, the Company announced its radically simplified unlimited "Simple Choice" service plan with no annual service contract. Device financing with the Equipment Installment Plan (EIP) provides customers with low out-of-pocket costs on some of the most popular devices available in the US wireless industry.

  • On July 10, 2013, the Company unveiled JUMP!(TM), a groundbreaking approach to more frequent phone upgrades. T-Mobile had more than 3.6 million customers enrolled in JUMP! at the end of the fourth quarter of 2013.

  • On October 9, 2013, the Company announced that it would make "the world your network - at no extra charge" - with unlimited data and texting worldwide in 100+ countries for Simple Choice customers. At the same time, T-Mobile announced that it had delivered nationwide 4G LTE in 233 metro areas covering 202 million people. Since then, 4G LTE coverage has increased to 273 metro areas covering 209 million people.

  • On October 23, 2013, the Company un-leashed tablets and revolutionized how customers buy and use tablets with free data for life. Customers receive 200 MB of free data every month with any tablet for as long as they own and use the device on T-Mobile's network. In the fourth quarter of 2013, T-Mobile had 69,000 mobile broadband branded postpaid net additions, principally composed of tablets, compared to 5,000 in the third quarter of 2013.

  • On January 8, 2014, the Company announced that it would reimburse Early Termination Fees (ETFs) for individuals and families who make the switch to T-Mobile and trade in an eligible device. The plan also offers a trade-in value for customers' phones.

In January 2014, the Company entered into agreements to purchase certain 700 MHz A-Block spectrum licenses from Verizon Wireless for approximately $2.4 billion in cash and the transfer of certain AWS and PCS spectrum licenses held by T-Mobile. Combined with the Company's existing Boston A-Block holdings, T-Mobile will have low-band spectrum covering approximately 158 million people, which will allow it to further improve the customer experience in major metro areas and boost in-building and breadth of network coverage. The transaction is expected to close in mid-2014.

Operational and Financial Highlights for the Fourth Quarter of 2013

T-Mobile ended the fourth quarter of 2013 with approximately 46.7 million customers, an increase of 1.645 million total customers from the end of the third quarter of 2013. T-Mobile significantly grew its total branded customer base, with 981,000 net customer additions during the quarter. Branded postpaid net customer additions of 869,000, including 800,000 phone net additions, continued the strong momentum seen in the second and third quarters, reflecting continued low branded postpaid churn and significantly higher gross additions. The Company's network modernization program and strong execution of its Un-carrier strategy contributed to a continued low branded postpaid churn rate of approximately 1.7% for the fourth quarter of 2013, flat versus the third quarter of 2013 and an improvement of approximately 80 basis points from 2.5% in the fourth quarter of 2012. The branded prepaid business exhibited improved customer growth with 112,000 branded prepaid net customer additions in the fourth quarter of 2013.

During the fourth quarter of 2013, the quality of T-Mobile's customer base and receivables portfolio continued to improve as a result of the Un-carrier strategy implementation and the effect of credit tightening over the past two years. 54% of EIP receivables were classified as Prime at the end of the fourth quarter of 2013, compared to 43% at the end of 2012. For the full year 2013, service bad debt expense was down 51% year-over-year. The Company's recent Un-carrier 4.0 launch has seen particularly strong uptake among the highest credit quality customers.

Total revenues for the fourth quarter of 2013 increased by 39.1% year-over-year, principally due to the inclusion of MetroPCS results in the fourth quarter of 2013, and 10.2% compared to pro forma combined total revenues for the fourth quarter of 2012, primarily due to higher equipment sales revenues on record smartphone sales. Total smartphone sales, including sales to branded postpaid and prepaid customers, were a record 6.2 million units in the fourth quarter of 2013, equivalent to 91% of total units sold, up from 88% in the third quarter of 2013. This represents a penetration of 81% of the total branded customer base at the end of the fourth quarter of 2013, up from 78% at the end of the third quarter of 2013. On a sequential basis, total revenues increased by 2.1%, again principally due to higher equipment sales revenues on record smartphone sales. The portion of branded postpaid customers on Value or Simple Choice plans was 69% as of December 31, 2013, up from 61% as of September 30, 2013.

Service revenues for the fourth quarter of 2013 grew by 25.2% year-over-year primarily due to the inclusion of MetroPCS results for the full quarter. Service revenues increased by 0.6% quarter-over-quarter primarily due to growth of the Company's customer base, offset in part by increased adoption of Value and Simple Choice plans, which have lower monthly service charges. Compared to pro forma combined service revenues for the fourth quarter of 2012, service revenues for the fourth quarter of 2013 declined 1.1% year-over-year. This represents a significant improvement compared to the third quarter of 2013 when service revenues declined by 4.6% year-over-year on a comparable basis. T-Mobile's service revenues have grown in each of the last three quarters on a sequential basis, reflecting the growth of the Company's customer base.

Branded postpaid average revenue per user (ARPU) decreased quarter-over-quarter by $1.50 or 2.9% to $50.70, primarily as a result of the continued rapid adoption of Value and Simple Choice plans, which deliver lower monthly ARPU due to lower service charges compared to bundled equipment and service plans. Branded prepaid ARPU for the fourth quarter of 2013 increased by $0.13 or 0.4% to $35.84 compared to the third quarter of 2013.

Adjusted EBITDA for the fourth quarter of 2013 was $1.239 billion, a 7.8% decline from the third quarter of 2013, reflecting strong customer growth and increased promotional expenditures. On a sequential basis, branded cost per gross addition (CPGA) rose by $10 to $317 reflecting increased promotional expenditures during the holiday season as well as higher equipment losses from growth in sales of higher priced smartphones. Branded cost per user (CPU) declined by $1 to $24 versus the third quarter of 2013 reflecting customer growth and ongoing strong cost control. In alignment with industry practice, Branded CPGA and Branded CPU will no longer be reported after the fourth quarter of 2013.

Cash capital expenditures for the fourth quarter of 2013 were $882 million, down from $1.0 billion in the third quarter of 2013 and $898 million in the fourth quarter of 2012. Cash capital expenditures reflect T-Mobile's continued investment in network modernization and 4G LTE deployment.

Operational and Financial Highlights for the Full Year 2013

On a pro forma combined basis, the Company added more than 4.4 million total customers in 2013, including 2.4 million branded net customer additions, which consisted of more than 2 million branded postpaid customers and 359,000 branded prepaid customers. This compares to a loss of 256,000 total customers in 2012, including losses of more than 1.5 million branded customers, which consisted of 2.1 million branded postpaid customer losses and 548,000 branded prepaid customer additions.

On a pro forma combined basis, total revenues increased by 5.3% year-over-year to $26.1 billion in 2013, while service revenues declined by 5.6% year-over-year to $20.5 billion in 2013, reflecting the shift from service revenues to equipment sales revenues driven by adoption of Value and Simple Choice plans.

On a pro forma combined basis, Adjusted EBITDA declined by 16.9% to $5.3 billion in 2013, while the Adjusted EBITDA margin declined to 26% on a pro forma combined basis from 29% in 2012, reflecting the very significant customer growth the Company experienced in 2013.

Cash capital expenditures increased by 13.2% to $4.2 billion on a pro forma combined basis due to the continued network modernization and 4G LTE deployment.

MetroPCS Combination

T-Mobile has continued to make rapid progress on the expansion and integration of MetroPCS. On July 25, 2013, the Company announced the strategic expansion of the MetroPCS brand with the planned launch of 15 new geographic markets. On November 21, 2013 the Company launched the MetroPCS brand in 15 further markets, bringing the total of expansion markets to 30. The Company has opened more than 1,700 distribution points in these new markets as of December 31, 2013.

The Company began selling T-Mobile-compatible devices to MetroPCS customers in the second quarter of 2013 through MetroPCS branded distribution points and has already transitioned approximately 3.5 million new and existing MetroPCS customers to the T-Mobile network.

2014 Outlook Guidance

For the full year of 2014, T-Mobile expects Adjusted EBITDA to be in the range of $5.7 to $6.0 billion. Cash capital expenditures are expected to be in the range of $4.3 to $4.6 billion.

With the success of our Simple Choice plan and the continued evolution of the Un-carrier strategy, branded postpaid net additions for 2014 are expected to be between 2 and 3 million. With this growth and rate plan migrations, the penetration of Value/Simple Choice plans in the branded postpaid base is projected to be between 85% and 90% by the end of 2014.

Quarterly and Full Year Financial Results

For more details on T-Mobile's fourth quarter and full year 2013 financial results, including its "Investor Quarterly" with detailed financial tables and the required non-GAAP reconciliations, please visit T-Mobile US, Inc.'s Investor Relations website at http://investor.T-Mobile.com.

For comparison purposes, pro forma combined measures presented in this release include the combined results of T-Mobile USA and MetroPCS to reflect the business combination for the relevant periods. See Investor Quarterly for further details.

Source: T-Mobile

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Reader comments

T-Mobile's aggressiveness brings in 1.65 million new customers, but also costs them $20 million in Q4

103 Comments

We switched over 19 lines from ATT and couldn't be happier. Simple Global plans rule. We were tired of ATTs false promises, billing mistakes, and high international fees.

yes, that was published today, not when Kurt was there, So, they waited until he and his 18 folks left... Sweet.

I and 4 members of my clan left Verizon and I tell, I am a happier man for it. No, I hope TMO gets new and more Windows phone or they will loose me and my clans.

We now need a good mis range phone. Windows phone has high end phone in latest like 1020,1520,925 and low end like 525,620. The 720 is the only mod range device available bit has also gone out of stock. So we want a new mid range phone but also with 1 Gb ram.

They also need to offer unlimited International texting plans to have more customers get the Windows Phone message/secrets that the rest of the world knows..

What do you want with "current"? My 925 is current with the Black update as of yesterday. Waiting to see what new Windows Phones start rolling out this summer.

But that's practically all they have. On ATT you can get the 520, 920, 925, 1020, 1520 and 8X.
With T-Mobile, you're lucky to get one out of every 3 flagship devices.

No they do not; T-Mobile is quick to drop support for phone; a mid-range Lumia 810 will never seem to be officially updated to 8.1. Same thing happened with the 710 not getting updated to 7.8.

It's a bit difficult to trust a provider such as T-Mobile with their track record in supporting Windows Phone.

I am waiting for a high hand windows phone to switch to T-mobile. Hopefully Microsoft will make that happens since they rely on carrier money to advertise.

They'll bring out a few devices but not a whole lot as T-Mobile is part of the OHA with Google as the parent company. Therefore, they'll push more Android devices since they're in bed with Google. I've talked to them on Facebook, Twitter, & on the phone that I would like to see more Windows Phones on their network. We shall see in the coming months. Also the reason why AT&T has a wide variety if Windows Phones is because Microsoft has a 3% stake in AT&T's stock.

They currently only have two handsets on display anywhere. The 925 and 521. Wish they would do more than have them on display in the back of the store, which I mention most times I visit.

About this article? Maybe because some of us are T-Mobile customers and therefore have an interest in this sort of news? Ever consider that?

That's just stupid. Some of us are att customers, some of us are Verizon customers, some of us are 02 customers, some of us are sprint customers, some of us are, well you get the idea. That doesn't mean WPc should be flooded with carrier news.

They reported on this type of stuff for different carriers before. And it doesn't flood Windows Phone Central news. Incase you didn't know this is a Mobilenations website. Keyword "Mobile". So anything mobile related such as wireless carriers makes sense. In my opinion you have a lousy complaint. Why complain about something that is mobile news..... when this is a mobile news website. Doesn't make any sense.

Note the name of the site: 'Windows Phone Central'. Windows phone is not mentioned anywhere in the article.

I rest my case.

You can obviously read that this article was about T-Mobile.  Only an idiot who doesn't care would click it and complain.  If you want your own rules... start your own site or go somewhere.

I imagine their parent company is being like Microsoft and Xbox. They'll just keep throwing money at it until they win. A few more quarters of stealing customers away and they'll be in a nice position to up their prices and get their lost money back.

T-Mobile offers free international roaming for over 100 countries. No need to be acquired by the worst US carrier's parent company for that.

Have been very very happy switching 5 lines to T-Mobile. Unlimited everything for $110 total, or $22 per line a month. No one else comes close to that. And yes I know that's only 500MB at 4G speed, but if you can't stand throttle then you can upgrade for $10 or $20 per line.

Switch to T-Mobile after nightmares with ATT, they are much better and I was really surprised they have LTE in a lot of places. I wish however that they get more windows phones.

They will make that $20 million back next year as more people come over, and they'd make even more if they only paid half the termination fee.

I don't mind the uncarrier movement (though they still do credit checks and 2 yr commitments if u don't pay for your phone upfront)... What I mind is that they seem to be on the slow side of pushing out updates. No GDR3 for the 8x as promised, as well as other phone updates.

The HTC 8x does have GDR3 even on T-Mobile. What they need to push is Nokia Black & update 3 for the Lumia 521 & not push it to the wayside like they did with the Lumia 810.

Maybe they only directly support two phones, but that $50+/mo I save compared to the other carriers. I cannot say my friend's 1020 is worth my 925 + another $350 (both models available 7 months ago). Plus my TMo LTE is significantly faster than his AT&T LTE.

You're 100% right, but my point is that for iPhone and Android users, this is great and I would definitely recommend T-Mobile. If Windows Phone users are ok with slow/no updates, barely any phones, and even "hate" from the T-Mobile retail employees, then I would also say it is a good choice.

Good job tmo,att was aware of this, they lowered my mobile share plan to $15 per smartphone I used to pay $30 per smartphone..they said we are trying to keep customers especially family plan..
My bill was
$120 for 10 GB
$30 x 5 smartphone 3 wp8 2iphone5
$10 tablet..
$50 next program 1520 and i5s
$340-350 a month
NOW
$120 FOR 15GB
$15X5 SMARTPHONES=$75
$5 TABLET
$50 FOR NEXT 1520 / 5S
TOTAL MONTHLY NOW IS
$250 plus taxes..take note ihave 15GB...CALL ATT FIND OUT ABOUT IT..

I was going to switch until I found out they would take 8 weeks to pay off ETF fees and their cell service is not that great in the western part of the US. A lot of dropped calls it seems. They do have cheaper service, but I need reliable service right now.

Come on T-Mobile give us Nokia Black & Update 3 on the Lumia 521. You've already pushed it on the 925, now show us 521 owners some love.

I switched to T-Mobile after being with ATT for 6 years, I couldn't be happier!!! We just need more Windows Phones!!!

On mobile at the Dr office in a big building no service in the middle but as long as I've got an eye line to a window I can get a signal....

That's what I'm saying too... If they don't want to update our phones then just let HTC or Microsoft push the updates to our phones!

I pay 40 dollas on aio wireless, an AT&T company. I get 500 MB a month and everything else is unlimited. It's been as good as AT&T for the most part, if not better since I get unlimited data after I use my 500, although it is throttled. I drove 3 hours with Pandora on and it didn't skip a beat. Pretty damn good for a budget service if you ask me :-)

I switched my family of four to T-mobile. Unlimiited data and texting, with 1000 shared minutes for about $100US total. We all have off-contract phones.  Interestingly, the four of us all use different OS phones: my wife has a WP Lumia, one child has an Android Galaxy S3, one child has an iPhone 5, and I have a Symbian 808.  All work great on T-Mo and have excellent coverage.

I hope the 1020 successor works well on T-Mo's LTE bandwidths, as I expect to move from my 808 to a WP camra-centric device when it becomes available.  I'd start on a 1020 today if it had an SD slot.

This is nice. I just hope mobile doesn't keep picking up the low end devices, or drop windows all together. I have the 925, and am eligible for upgrade. Unless tmo picks up another high end Lumia, I'm going to att.

The future looks good for T-Mobile. Just keep bringing more Windows Phones and better coverage and I will continue to be happy. :)

So theoretically, couldn't ATT and Verizon just agree to each raise their ETF to some outrageous amount to prevent Tmobile from paying them?

The etf is fixed from the contract so that would only apply to new contracts (or upgrade). $350 is the max that tmo will pay

Posted via the WPC App for Android!

Crappy service where I live plus I travel a lot and hit deadzones for miles at a time when I had T-Mobile. Great plans, cheap and all that, but I'd rather pay more for better service.

Being a reluctant T-Mob subscriber myself, I find my head using calories writing you wishing you were d exploding. I'd like to hear there next sales pitch. We're the best! Where!

Started switching lines from T-Mobile to AIO last week.  Sorry T-Mobile, but your WP "support" just doesn't cut it for this former customer of 10 years.

I'll ditch AT&T for T-Mobile the day they get LTE in my area. Although that could be a while considering we're still on 2G EDGE here.

More size 10*80x.'s? T. flash. Apps, audio X. Being there is a ios for it, singularly, hypothetically bringing on the beast!

I don't know why anyone on here would want to switch to T-Mobile if they're a fan of Windows Phone; T-Mobile never officially supported in updating the Lumia 710 from 7.5 to 7.8, and more recently, not updating the Lumia 810 from 8 to 8.1.

So many 810 users are burned by T-Mobile with their decision and it's pushing many users either to:

a) drop T-Mobile and find a different carrier that will actually support their phones throughout the life of the contract or

b) go to iOS or maybe Android, where there are better and reliable avenues for getting updates (due to distrust in Microsoft and their promise of WP users always getting updates).

I'm just a bit surprised with all the love on here towards T-Mobile.

I hear you, but I don't get you.

I am one of those that trust Microsoft and I am sure there are few more. I agree that TMO have not shown a good support for WP, but, that really does not diminish their network service and awesome plans pricing compared to the other clowns.

You know you can buy any compatible phones on amazon, ebay etc and bring them to TMO with good coverage pricing to die for. So, your input here where on one hand you bash TMO, then MSFT plus WP just don't make sense.

This beg to ask, How did they manage to poach 1.65 Millions new customers which cost them $20 mil and still manage to raise 39% more revenue compared to same period last year of $6.8 Billion (That is a $2.625 Billion revenue increase) Verify my numbers from the author;s posting

"The old adage goes that you have to spend money to make money, and that's exactly what T-Mobile's been doing. Today the fourth-place US carrier reported their Q4 2013 earnings and the results were mixed. While they added 1.65 million new customers — good for the long haul — the hyper-aggressive marketing and incentives resulted in a quarterly loss of $20 million. Granted, that's on revenue of $6.8 billion for the quarter, an increase of 39% from this time last year. But a loss is a loss."

Derek K; What do you mean a loss is a loss? you made 6.8B in revenue, gained 1.65 Mil new customers that cost you $20 Mil but increased your revenue stream compared to same time last year by 39% ( that is $2.625B). If that new customers poaching is conservative 2.5% of the difference versus last year same period, that is a whooping $65+ Million revenue for a $20 million cost of poaching.  Please!