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T-Mobile Q1 2024: Breakthrough Service Revenue and Profitability

T-Mobile Q1 2024: Breakthrough Service Revenue and Profitability

The News: T-Mobile reported first quarter (Q1) 2024 results, raising full year guidance and delivering breakthrough customer growth, including a higher share of postpaid phone net additions year-over-year (YoY) and matching its lowest ever Q1 postpaid phone churn. Read the T-Mobile earnings press release here.

T-Mobile Q1 2024: Breakthrough Service Revenue and Profitability

Analyst Take: T-Mobile’s Q1 2024 results were highlighted by translating customer growth into breakthrough growth in service revenue and profitability alongside returning $4.3 billion to stockholders in the quarter. T-Mobile called out surpassing 5 million high-speed internet customers as evidence that the company is executing its growth strategy by beating the competition across key categories such as service revenue and profitability gains.

T-Mobile Claims Industry-Leading Customer Growth Underpinned by Combination of Advantageous Network and Value

  • Postpaid net account additions of 218,000, decreased 69,000 YoY
  • Postpaid net customer additions of 1.2 million, decreased 73,000 YoY
  • Postpaid phone net customer additions of 532,000, decreased 6,000 YoY
  • Postpaid phone churn of 0.86%, improved 3 basis points YoY
  • Prepaid net customer losses of 48,000 decreased 74,000 YoY
  • Prepaid churn of 2.75%, improved 1 basis point YoY
  • High-speed internet net customer additions of 405,000 decreased 118,000 YoY; ended the quarter with 5.2 million high-speed internet customers
  • Total net customer additions of 1.2 million, decreased 147,000 YoY
  • Total customer connections increased to a record high of 120.9 million

T-Mobile Spotlights Translating Customer Growth into Financial Performance Boost

  • Total service revenue of $16.1 billion, increased 4% YoY, and postpaid service revenue of $12.6 billion, increased 6% YoY
  • Net income of $2.4 billion, increased 22% YoY, which included merger-related costs, net of tax, of $97 million
  • Diluted earnings per share (EPS) of $2.00 per share, increased 27% YoY
  • Core adjusted EBITDA of $7.6 billion, increased 8% YoY
  • Net cash provided by operating activities of $5.1 billion, increased 25% YoY, which included cash payments for merger-related costs of $293 million
  • Cash purchases of property and equipment, including capitalized interest, of $2.6 billion, decreased 12% YoY
  • Adjusted free cash flow of $3.3 billion increased 39% YoY, which included cash payments for merger-related costs of $293 million
  • Stockholder returns included 21.9 million shares of common stock repurchased for $3.6 billion in Q1 2024, with 136.2 million cumulative shares repurchased for $19.8 billion as of March 31, 2024; the remaining authorization for stock repurchases and quarterly cash dividends through December 2024 is $11.7 billion, with the next dividend payable on June 13, 2024

T-Mobile Expands Mid-Band Spectrum Deployments

T-Mobile’s Ultra Capacity 5G network has expanded its mid-band 5G spectrum deployment, with nearly 95% of 5G network traffic on mid-band including the recently deployed Auction 108 spectrum. The company’s multi-layer approach to 5G, with dedicated standalone 5G deployed nationwide across 600 MHz, 1.9 GHz, and 2.5 GHz aligns with customer demand for a consistent robust experience, with 85% of 5G traffic on sites with all three spectrum bands deployed.

As a result, we find that T-Mobile is capitalizing on 5G spectrum optimization to increasingly becoming the overall network experience for customers. Accordingly, approximately 75% of postpaid phone customers are on a 5G device and the company has earned third-party recognition for its overall network performance.

We are encouraged by T-Mobile’s Q1 2024 results and overall market momentum across the mobile ecosystem. T-Mobile delivered remarkable gains across key financial metrics including YoY service revenue, YoY net income, YoY net income, YoY net cash, YoY diluted EPS and adjusted free cash flow.

T-Mobile Demonstrating Shrewd 5G Ecosystem Moves

In January 2024, T-Mobile and Cisco united to debut T-Mobile’s Connected Workplace service aimed primarily at midsize businesses. The union combines T-Mobile’s managed services with Cisco Meraki networking solutions to provide 5G business Internet with built-in security assurances and streamlined networking capabilities, particularly throughout retail store and branch environments.

Connected Workplace includes T-Mobile installation, software licensing, and 5G gateway and Wi-Fi access point device upgrades every three years at no additional cost. We see the new T-Mobile package energizing the push by T-Mobile for Business to challenge incumbent services offered by key rivals such as AT&T Business and Verizon Business as well as sundry regional Internet service provider (ISP) offerings.

From our perspective, T-Mobile’s Connected Workplace offering fully leverages Cisco Meraki network technologies to streamline the network infrastructure of midsize businesses key to minimizing IT and operational complexity on a comprehensively secure and cost-effective foundation. In turn, Connected Workplace is solidly positioned to make swift competitive inroads across the midsize business landscape, energizing competition to the benefit of customers and partners.

In March 2024, Dialpad from T-Mobile and Dialpad, Inc. business customers using Dialpad get new AI-enabled features, including Ai Recaps delivered with 100% uptime service-level agreements (SLAs). Ai Recaps is developed on Dialpad’s proprietary DialpadGPT – a large language model (LLM) specifically designed for business conversations. Ai Recaps leverages more than 6 billion minutes of Dialpad’s proprietary conversational data to provide precise, customized insights.

We find that the joint launch can move the needle for business communication, due in large part to Dialpad’s advanced technology aligning with T-Mobile’s 5G network. Since announcing their strategic partnership in 2021, T-Mobile and Dialpad have been exploring new technologies to help customers transform their businesses with cutting-edge communication solutions. That’s why, in addition to partnering on AI innovation, Dialpad is part of T-Mobile’s 5G Network Slicing Beta, which is aimed at significantly improving video calling experiences.

Further burnishing its enterprise 5G laptop connectivity and security credentials, in February 2024, T-Mobile unveiled that Ericsson has selected T-Mobile as the 5G provider for the first phase of its internal enterprise virtual cellular network (EVCN) pilot in the U.S. Under the agreement, T-Mobile will deliver connectivity along with Secure Access Service Edge (SASE) capabilities for employees’ 5G laptops. EVCN is a managed IT service that enables enterprises to have their own 5G virtual network. It can make it easier for enterprise IT teams to bring employees a secure corporate network connection when working remotely.

Also, we are encouraged that Mo Katibeh is joining T-Mobile as the Chief Marketing Officer of T-Mobile For Business to reinforce its customer-first approach and delivering competitive advantages to business customers through differentiated portfolio capabilities such as network slicing, SASE, and AI-enabled features.

The Rising Fiber Factor

T-Mobile entered into a joint venture (JV) with EQT’s Infrastructure VI fund (EQT) that will acquire fiber-to-the-home platform Lumos from EQT’s predecessor fund EQT Infrastructure III. The JV will bring T-Mobile’s retail, marketing, brand, and customer experience capabilities together with EQT’s fiber infrastructure investment expertise. Together they will acquire Lumos’ scalable fiber network build capabilities to deliver high-speed fiber internet connectivity to customers across the U.S. without access to fiber today.

From our view, T-Mobile is making the right move to swiftly expand fiber connectivity across its overall portfolio mix. T-Mobile started building its fiber network in mid-2023 through the T-Mobile Fiber launch across parts of 16 U.S. markets with the strategic goals of directly countering the in-portfolio fiber capabilities of major broadband rivals such as AT&T, Verizon, and Google. Through the deal, T-Mobile adroitly avoids the arduous process of building out its fiber network from scratch which typically requires costly construction and right-of-way approvals that can prove disruptive.

Currently Lumos is available at 320,000 households and has built out 7,500 miles of fiber cable across the Mid-Atlantic region including Pennsylvania, Virginia, and Maryland. This region, while intensely competitive, lacks full coverage by AT&T, Spectrum, and other fiber providers. As such, we find that T-Mobile can attain relatively swift inroads into the fiber connectivity segment while avoiding the steepest challenges in bringing fiber customers onboard.

T-Mobile Q1 2024 Takeaway: Raising Guidance Boosts Confidence

T-Mobile is raising its 2024 outlook powered by continued customer growth and merger synergies. Key 2024 guidance highlights include:

  • Postpaid net customer additions are expected to be between 5.2 million and 5.6 million, an increase from prior guidance of 5.0 million to 5.5 million.
    Core adjusted EBITDA, which is adjusted EBITDA less lease revenue, is expected to be between $31.4 billion and $31.9 billion, an increase from prior guidance of $31.3 billion to $31.9 billion.
  • Net cash provided by operating activities, including payments for merger-related costs, is expected to be between $21.6 billion and $22.3 billion, an increase from prior guidance of $21.5 billion to $22.3 billion.
  • Cash purchases of property and equipment, including capitalized interest, are expected to be between $8.6 billion and $9.4 billion.
  • Adjusted free cash flow, including payments for merger-related costs, is expected to be between $16.4 billion and $16.9 billion, an increase from prior guidance of $16.3 billion to $16.9 billion. Adjusted free cash flow guidance does not assume any material net cash inflows from securitization.

Overall, we expect T-Mobile to achieve its raised 2024 guidance as the company is consistently outperforming its key rivals across the most important mobile network service categories, including service revenue, profitability, and customer retention. T-Mobile delivered remarkable gains across key financial metrics such as YoY service revenue, YoY net income, YoY net cash, YoY diluted EPS, and adjusted free cash flow.

We are positive on T-Mobile’s Q1 2024 results and overall market momentum across the mobile ecosystem. T-Mobile is consistently showing the entire mobile industry why it is the 5G ecosystem pacesetter by executing relentlessly on its strategic portfolio development and market vision.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Other Insights from The Futurum Group:

T-Mobile Enlists Cisco Meraki to Launch Connected Workplace

Ericsson, T-Mobile, and Qualcomm Deliver 6CC Breakthrough

5G Factor: Signs of 5G Turnaround?

Author Information

Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.

He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.

Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.

Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.

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