Un-carrier Q3 earnings call highlights: iPhone 6 demand, record-breaking everything and more…

tmobile_sign

Within the past couple of hours, T-Mobile finished its Un-carrier style earnings call. And unlike any other call I’ve listened in on, very little time was given to the scripted run down and slides of all the quarter’s financials. Instead, Legere&Co wanted it to be an open discussion between analysts, journalists and themselves, switching between answering questions on call and questions posed on Twitter.

Because of the varying themes in the questions asked, there was no one single thread or narrative to the call except to say: T-Mobile is doing really well.

As reported yesterday, here are the key highlights from Q3

  • Fantastic quarter, biggest growth quarter, best quarter for postpaid branded adds net
  • 1.4 million postpaid net adds, 1.2 million postpaid phones (record)
  • 411,000 branded prepaid (record)
  • 10 million net adds over the last 6 quarters
  • Service revenue – 10.6%up year-on-year – $5.7 billion (record)
  • ABPU – 4.2% up YoY – $61.59 per month (average monthly spend per user)
  • Adding the right customers, high customer lifetime value. Not just low value customers joining.
  • 250m PoPs LTE coverage, 260 million by the end of the year
  • 280 million by mid-2015, 300 million by year end 2015
  • 700MHz and 1900MHz LTE rolling out
  • Wideband LTE rolling out to new markets – 19 markets currently (26 by year end)

Analysts questions, as you’d expect, mostly revolved around money and the usual metrics: ARPU/ABPU (average revenue per user) and EBITDA (earnings before taxes/expenses etc.).

One thing reiterated during the call was T-Mobile’s balance between offering great value plans, but also maintaining profitability. Although it made a loss, revenue for T-Mo is at its highest ever level of growth. And, although Sprint has recently announced a really low, generous plan, it doesn’t help anyone if the network behind it isn’t very good. And so, T-Mo isn’t going to go “Unlimited everything for $50” in response. It doesn’t need to. Sprint is going through a huge network restructuring and potential for customers to join, hate the service, and leave is really high.

T-Mobile has focussed on value, while also upgrading its network at ridiculous speed. What’s more, offering a free test drive to customers so that they can try out the network before signing up. There’s also the +$30 unlimited data tier on Simple Choice (launched earlier this year) that boosts T-Mo’s average revenue per user to its highest ever monthly spend of $61.59.

What I found particularly insightful was that T-Mobile – of the four major carriers – is the #4 spender in marketing. It spends much less than its rivals, and yet is #1 in growth. And that’s down to the public spreading the news, social media, and great experiences.

Porting ratios are still good too. For every customer porting their T-Mobile to one of other carriers, another 2.2-2.5 are coming the other way.

With all that taken in to account, and October’s unannounced performance, T-Mobile estimates that it will end Q4 with another 700k-1.1 million postpaid net adds. Which – although conservative – would still be a very good quarter.

iPhone 6/6 Plus Supply and Demand

We all know the iPhone 6 and 6 Plus launch didn’t exactly go smoothly. Demand was “unheralded” according to T-Mo. But, on the plus side, the supply and demand issues haven’t dampened the desire for the device by consumers at all. The company predicts that supply will remain constrained for the iPhone 6 in to November. But an end is definitely in sight.

With the iPhone 6 Plus, it’s a different story. Apple is having trouble getting enough of them on to shelves and to the carriers. It’s likely that supply won’t catch up with demand until the beginning of 2015.

Uncarrier 8

As with any quarterly report, T-Mobile hinted vaguely at the next Uncarrier move(s). Some of what they mentioned on the call was perhaps hinting slightly at pulling Verizon and AT&T’s loyal enterprise/business customer base away from them. But that’s all. No specifics. And, although some sources are edging along the same lines, we’ve not heard any real specifics elsewhere either. But stay tuned, the picture could become clearer relatively soon.

If you want to listen in, or catch up, head on over to the T-Mobile investor site and catch the webcast there.

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  • Ben

    This is excellent news for most of us in Magenta nation. Hopefully this news will push DT to cut the crap.

    • J-Hop2o6

      Waiting for this soon. I’m sure Sprint lost a good amount in Q3, so it’s gonna be interesting when they release their results (not sure when that is though).

      • UMA_Fan

        What they hinted at is that if Sprint shows any growth a lot of it could just be people with extra lines on their account that they don’t use.

        The price on Sprint right now whether you have 2 lines or 10 lines is the same. Could go a long way towards distorting numbers.

        • archerian

          how would the price for 2 lines or 10 be the same? do you mean price per line? then how does it distort numbers?

        • UMA_Fan

          The 20 GB for $100 on Sprint is that price whether you have anywhere 2-10 lines. They are waiving the line access fee charge. $100 is the data bucket.

        • archerian

          this is like the offer from T-mobile to waive the AAL fee in 2012-13. I don’t know if that would be a distortion of numbers as its an offer that actual people choose to take. After all Sprint wont be paying the taxes and E911/county fees for lines that have their access fee waived, so only real users will be adding/using them.

        • UMA_Fan

          Back then with that promotion they were losing customers anyway so it really is moot at this point.

      • harbmike99

        Nasdaq said “Sprint Corporation is expected* to report earnings on 11/03/2014 after market close”
        so next week.

        • J-Hop2o6

          Thanks

        • Jay J. Blanco

          I read 4th

    • MMA Prints

      DT reported that they were happy with keeping T-Mobile on board. Who knows how long this will last though.

      http://www.reuters.com/article/2014/10/14/us-deutsche-telekom-usa-iliad-idUSKCN0I323220141014

  • miles

    Funny how apple users waited for so long for a real phone upgtade they except crap

    • MilesAFool

      They did accept crap. Bought Android crap and now want something real.

  • Why no mention of prepaid additional customers? For the life of me I cannot fathom a $60+ cell phone bill. Why pay $70 plus fees for 5GB and when the $30 plan with unlimited Hangouts calling costs less than half?

    • J-Hop2o6


      411,000 branded prepaid (record)”

      • I thought that this referred to prepaid phones, not customers.

        Thanks.

  • Verizonthunder

    Maybe John Legere will crash the Sprint third quarter report to say we surpassed you!

    • Paul

      THAT would be hilarious.

    • superg05

      you should send that idea to john on twitter

      • Verizonthunder

        I am flattered but I think he has the same mindset to do so. Just look at the party he crashed when Audi announced a new partnership with At&t which was hilarious.

  • TWK

    Misdirection – a magician’s trick. The goal is to make money, not pass Sprint. They failed, and will continue to fail at making money.

    • MMA Prints

      Which is not uncommon for any corporation that is investing heavily back into it’s business. T-Mobile has been wildly successful in everything it has attempted over the 18 months.

      • TWK

        No, you have it backwards. They have to make money before they can invest it back into the business. The capital (equipment) that they are purchasing now will be expensed over the next 5 or more years so doesn’t hit the books right now. They are spending too much getting customers, paying their ETF’s, who will leave within a year when their phone doesn’t work in many places. The math never works.

        • Maximus

          They won’t leave for at least two years b/c they have to pay their phone off. Or they will have a fine experience and not leave at all.

        • MMA Prints

          Well it has been 18 months and T-Mobile is growing even faster with more customers than ever before, so your statement that they will “leave within a year when their phone doesn’t work in places” is a bit off. Maybe you are like me and you live in a very rural area, but most of the population is centered in large metro areas where T-Mobile has some of the best LTE coverage from any carrier.

        • Jason Crumbley

          Someone hasn’t been paying attention because T-Mobile has been making money. This is their first negative quarter in quite a while, and it’s only negative because they were investing back into the company. Sprint, on the other hand, is hemorrhaging money because it’s losing customers. Passing Sprint means they are making money.

        • TWK

          You should pay attention yourself. How can they have as many customers as Sprint, but less revenue? Too many cheap plans. Sprint’s losses are due to idiocy as it applies to acquisitions, their rates and revenue are fine. With their current (new) model, T-mobile can’t make money ever again.

        • UMA_Fan

          T-Mobile’s revenue is rising and higher than it’s ever been. What more could you want? It’s the cost of adding THAT many customers which made them post the loss. If they added slightly less customers they would have posted a profit. You would have to be stupid to think their current situation isn’t better. All those new monthly paying customers will pay off for them down the road.

        • Jason Crumbley

          Dude, you’re an idiot. Your trolling needs much work.

        • Romdude

          We all know he’s trolling. It’s obvious. Just ignore him.

        • UMA_Fan

          Margins are higher at T-Mobile. Sprint had razor thin margins BEFORE their current price plan cuts. That’s why sprint is facing layoffs store closures etc. Not at T-Mobile they are continually opening new doors.

        • superg05

          tmobile is gaining money even though they are putting a large chunk of it towards the upgrade of there network

        • archerian

          Passing Sprint was mainly possible due to the MetroPCS acquisition.. that added nearly 10M users in a single swoop

        • Zacamandapio

          Not acquired. Joined.

        • Mark J

          I’m in downtown Dallas Note3. 5 bars 4G LTE 700 meters from tower between 9am 6pm drop calls often during call echo data speed 0.4-0.7 nightmare service close to none. CS is BSing “towers are working” just capacity is below any standard this is another face of TMobile

        • UMA_Fan

          They are not spending too much to gain customers. You’re speaking without any relative perspective. They added MORE customers than att and verizon. This is a big deal. T-Mobile is playing like the number one wireless company. Everyone is choosing them. They could have still added right around what at&t and verizon are adding and posted a profit. Seems pretty healthy to me.

        • TWK

          No, Verizon added more, always has, and always will. T-mobile had a higher percentage growth which is not the same thing. I can flip to and from T-mobile 3 times per year, and get them to buy me a new Verizon iPhone 6+ to sell each time. That’s $1500/year I can pocket from Legere and Co., or about half of a nice vacation. They can’t make money in this way.

        • UMA_Fan

          What are you smoking? Verizon essentially LOST customers this quarter. They posted a net positive of activations purely from existing customers adding tablets to their account. A lot of times they are pitched to Verizon customers as ‘free’ low end tablets.

          All these customers T-Mobile is adding are making them money already and will in the future.

        • fentonr

          If the math never works than 99% of companies would have already failed. Nearly all companies operate in the red for a while. Either while starting up or while attempting a turn around.

    • fentonr

      Making money isn’t everything. If Tmo didn’t spend anything on advertising or network growth they would make a healthy profit, they did this a few years back and it put them in a position where they had to play catch up. Not investing in their business is as bad as shutting your doors now.

      • J-Hop2o6

        This. T-Mo was already in a bad position a few years back by not seriously investing in their company. Now T-Mo has been fixing their negative image and it has been working wonderfully. Yes, it has been squeezing on their profits, but you have to start somewhere or else the company would have sold for scraps by this point.

      • archerian

        Making money is everything for a publicly traded company. How it is achieved is secondary – customer loyalty, price wars etc.

        • dtam

          obviously he doesn’t mean forever. but if for two-three years they need to reinvest heavily to build a strong network, they will be healthier and more profitable in the future

        • archerian

          investment in the network is a sound choice, it was funded by getting long term debt, so when the network is ready, they will have to pay for it. But by that time, they should still hold on to the customers they gained now.

        • fentonr

          No, its not, creating shareholder value is everything for a publically traded company. There are two ways to do this: 1. Take the short sighted approach and make sure you squeeze out a profit every quarter while your business deteriorates/opportunities pass you buy or 2. Invest in your business and grow it to be stable and profitable long term even if it means losing money now.

  • Mike Palomba

    Any place where we can see the call?

  • Joe Wireless

    Nice list of growth, impressive! Are they making a profit? Who cares about growth if you have no profits. Any update about profits and earning money?

    • fentonr

      Growth without profit can be a good thing. If there is growth but the cost of network improvements is up that’s fine, the network investment will allow them to grow more and retain existing customers. You have to spend money to make money.

      • archerian

        “growth without profit can be a good thing” – Jeff Bezos said the same thing….

        • Romdude

          Yes but tmobile didn’t launch the fire phone. Big difference.

    • dtam

      they lost $94 million this past quarter, which doesn’t tell the whole story. like fentonr said, you have to spend money to make money. they are spending a lot for all of those cellspots, network boosters, ETFs and network upgrades

      • J-Hop2o6

        Yup. It will all work out in the end once T-Mo reaches a comfortable level for their company that will retain their customers.

        • archerian

          “that will retain their customers” – cost is the main reason for ppl to move to T-mobile.. if profits have to go up, cost will have to go up … there is no real loyalty in the mobile business. Just as easy as T-mobile snatched users, others can too if T-mobile raises prices.

        • dtam

          yes, there’s no real loyalty…but I’m not sure why they would have to raise prices. currently their spend is really high. when their network is caught up, they can ramp down their speed and spend.

        • archerian

          T-mobile’s investment in network infrastructure is funded by issuance of long term debt, so it doesn’t really figure into Income/Loss currently. Most of the current expenses are from equipment sales and marketing/admin etc. – like paying of ETFs. So investing in a better network is not reason for showing an operating loss.

        • TYLERDERK

          Cost is not the main reason people switch to T-Mobile.
          Its VALUE with Unlimited Data,,Unlimited music streaming,
          No overages domestically,
          Free Roaming in over 120 countries , GoGo in flight services, WIFI Calling on all T-Mobile devices, Free hotspot on all data plans, Free wifi routers , Incredible internet speeds
          Great phone selection free unlock after 40 days of service giving a device that’s is worth more as a GSM unlocked device that can be used in most countries, No contracts, freedom to upgrade anytime you want And being part of a revolution that is changing the industry making it better for all USA wireless customer regardless of what carrier you are using.

  • maestroalvarez

    Hey guys… a little bit off topic here. Need your help. I bought a sim for data (mobile hotspot). Is there a way to use my Note 2 as a mobile hotspot instead of having to buy an actual hotspot? Otherwise, I may need to buy one :( Any ideas?

    • TWK

      You could make it work for a bit, but they would detect that it is a phone on a data sim and lock it out at some point. I would buy a hotspot, the 4G ones (non-LTE) are really cheap, and designed to do a better job at it than a phone.

      • maestroalvarez

        Thanks, TWK!!!

        • Darwinski

          Doesn’t the Note have a hotspot built in?

        • maestroalvarez

          It does, this was for my wife’s Note 3, which is on T-Mo’s cheapest plan (only 1GB). I was attempting to take advantage of T-Mobile’s Hotspot plan which matches UNL data up to 5GB for just $10, which is the most cost-efficient solution for me.

          I ended up buying a Hotspot off of Craigslist for $25. The guy even threw in a $50 prepaid card. Hotspot has been working great for 4 days straight. The ZTE branded hotspot has pretty good battery life, too.

          Thanks all for your help!

        • Jay J. Blanco

          You can buy a hotspot on ebay for as cheap as 30 dollars

    • Ggrayy13

      If you have a tmobile data plan then you should have hotspot built into your data package on your phone . Which data plan do you have?

    • stluser

      you might be able to pull that off if you activate that sim on the $30 100min/5gb plan. I can use my note 2 as a hotspot using that plan. if your note 2 is running android 4.3, it will be alot harder to get the hotspot working. wifi tether doesnt work with 4.3.

    • XDAFAN

      You can find the info to make hotspots work regardless of the version of android over @XDA.

  • zach

    your plan should come hotspot.

  • Dakota

    Has Tmobile ever said how many people have done the test drive, and then how many they converted to customers. Tmobile seems to advertise a lot more than they used to. The commercials also have a much clearer message than they used to. Bold colors, quick points vs men living in shoes and girls on motorcycles. Their CEO also has maximized social media impact

  • sammy

    Love the earnings. But does anyone have the same questions as I do:

    1. Tmobile created the 2.5GB promo in response to Sprint. (Or simply make their plans attractive)
    2. Verizon and ATT respond to tmo with their own enhanced data promotions.
    3. Tmobile ends the very promotion, (almost abruptly) which caused the other carriers to enhance their own data offerings.

    A. Doesn’t this leave tmobile at a disadvantage?
    B. They must have a trick up their sleeve, what is it?

    • TWK

      I don’t know, the only promotion that was hinted at today pertained to business accounts. You make good points, though.

  • guest nonstop

    I got my 6+ 9 days after Sep 13 preorder. My friend ordered 1 week later and is STILL waiting for it.

  • Richard Beasley

    I often drive outside of T mobile coverage area, can I use a MiFi from the carrier that services that area.